MSCI Constituent Stocks Adjustment Is Difficult Now Incremental Funds A Shares "Reinforcements" Waiting For FTSE Russell Expansion In June

Beijing time 5:30 on May 13th, MSCI announced the semi annual index adjustment results, this time did not announce further enhance the A share into the factor follow-up plan.

The above adjustment is consistent with the document issued by MSCI in November last year, that is, after resolving the four key problems such as the lack of derivatives, the disunity of Shanghai and Shenzhen port and A shares, the A will be further invited to solicit opinions.

In other words, this adjustment is only a structural change, rather than an increase in aggregate level. The impact on individual stocks is greater than that on the market as a whole.

During the adjustment process, MSCI total China Index added 56 new stocks (including Hong Kong stocks, stock shares, etc.), excluding 54. In addition, MSCI China A shares increased by 61 on shore index stocks, of which the market value of Zhong Gong education, century Huatong and Galaxy Securities ranked the top.

However, due to the complexity of the MSCI index system, the MSCI China onshore index and the MSCI China stock index are all domestic and overseas investors' exclusive indices, and their tracking funds and influence are relatively limited.

In contrast, the gold standard and the highest concern are the MSCI global standard index. In the May 13th adjustment, the Index added 56 Chinese stocks, including A shares, Hong Kong stocks and stocks, while excluding 45 Chinese stocks, such as Rui Xing coffee, which exposed the scandal of financial fraud.

Long term stock price volatility still has to return to fundamentals and valuations, not winning the MSCI index and gaining a "gold medal". IC photo

Quarterly adjustment

In the middle of each quarter, MSCI officials will make routine adjustments to the constituent stocks, but their officials have not given specific adjustment criteria.

"In principle, stocks will be selected according to liquidity, company market value and industry representativeness, among which liquidity is the most concerned indicator of MSCI". Guosheng Securities pointed out.

The adjustment of constituent stocks announced in May 13th is a regular quarterly adjustment.

"The result of this deliberation is only adjustment. There is no big change and expansion. It has little impact on the overall level of capital, but it has a great impact on individual stocks." Nanhua futures evaluation said.

On the same day, the trend of the two tier market also showed consistency with the adjustment. The public education rose slightly, and China's flying crane rose more than 7% in the intraday market, while the rejected Vita milk group fell nearly 5% in the morning.

For the new stock index of the MSCI index, it is expected to get more capital attention. "Indeed, more attention will be given to this stage. MSCI has its deliberative evaluation logic and its guiding value to the capital side, which is of great reference value." Yang Peiwen, director of private equity and government assets, said 13.

Tracing all the new cases can also be seen that after being included in the MSCI index, there will be some changes in the underlying funds.

The third expansion in November 2019 was included in the top ranking companies of the stock market, including CITIC construction, Peng Ding holdings and Hui Ding technology.

Subsequently, foreign shareholding increased to a certain extent. Take CITIC construction investment as an example. In the early December 2019, the share price remained near 22 yuan, and then increased to 38 yuan in March 5th this year. During the same period, the proportion of shares held by the north to the circulating stock increased from 2.43% to 3.33%.

However, the good timing of the MSCI index is shorter than that of the stock market, and the two stage market will go down sharply.

"For us, a good target has its own evaluation system, which is the basis for the selection of stock pools, but good price is the core factor of participating in the transaction, and the timing of buying and selling needs another evaluation basis." Yang Peiwen said.

Long term stock price volatility still has to return to fundamentals and valuations, not winning the MSCI index and gaining a "gold medal".

Foreign capital expansion "first quarter" ended in June

Since the MSCI is only an adjustment to the constituent stocks, rather than a follow-up plan to further enhance the A share factor, the impact on the overall capital side can be ignored.

? ? ? This is consistent with the documents issued during the third expansion in November 2019, that is, in the background of the lack of derivatives, the short time trading settlement period, the difficulty of improving the backstage operation in the region, the disharmony of Shanghai Shenzhen Hong Kong Tong and A shares closing time, and the lack of flexibility in the trading mechanism between Shanghai and Shenzhen Hong Kong and Shanghai through the four issues, MSCI will further solicit public participation in the promotion of A shares. Opinion.

"At present, there are a number of concerns that overseas investors have restrictions on the number of QFII custodians, the fact that capital remittance and tax clearance procedures are too long, which have been well resolved. But the problem of restricted derivatives such as foreign investors has not been solved, which is the most difficult problem to solve in the short term. Soochow Securities pointed out.

Looking back at the domestic financial derivatives market, the biggest progress made in the first half of the year is that commercial banks are allowed to participate in treasury bond futures. After several years of deregulation of stock index futures, the margin level has been very close to normalization, but there is still some space for loosening up.

Under the background that the above four problems haven't been solved effectively, it is difficult for MSCI to further enhance the A share factor this year.

In contrast, the expansion of FTSE Russell is visible in the near future. It will issue semi annual index examination results in May 22nd, and the changes will take effect before the opening of June 22nd.

This is a continuation of the expansion in 2019. In March of this year, the FTSE Russell announcement pushed forward the expansion of A shares as planned and increased the inclusion factor of A shares from 15% to 25%.

The implementation is divided into two steps, of which 1/4 has been completed in March and the remaining 3/4 will be implemented in June 2020. The proportion of A shares will be increased from 17.5% to 25%, and the increase of passive allocation of foreign capital is expected to bring new incremental funding to the A share market.

At that time, the above two indexes will be completed in the first stage of A shares, and the inclusion of the Dow Jones index needs to be evaluated in June this year.

It is not difficult to see that compared with the multiple expansion of the above main indexes in 2019, the expansion of the main index has significantly decreased this year, and the flow rate and volume of foreign capital entering the A share market may not be higher than that in 2019.

Correspondingly, the impact of foreign capital on the two tier market may be reduced, and there are also some agencies that believe that the operation of the market is more dependent on domestic strength.

On the positive side, since the outbreak of the outbreak, domestic production and operation have been rapidly restored, and the economies of Europe and the United States have been severely damaged. The difference between resumption of production and economic recovery may further strengthen the "safe haven" effect of A shares, but ultimately it depends on specific data.

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