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<Research Report>CICC, after MSCI China Index Tweak, Eyes Positive Impact on GIANT BIOGENE & LENOVO, Negative Impact on 3SBIO & U-PRESID
CICC wrote in a report that MSCI announced the results of its quarterly review, adding 5 new companies to the MSCI China Index and removing 66, while adjusting the free float facto...
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<Research Report>CICC, after MSCI China Index Tweak, Eyes Positive Impact on GIANT BIOGENE & LENOVO, Negative Impact on 3SBIO & U-PRESID
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CICC wrote in a report that MSCI announced the results of its quarterly review, adding 5 new companies to the MSCI China Index and removing 66, while adjusting the free float factors of 14 companies and the inclusion capitalisation of 177, resulting in a change in the weighting of constituents in the index.

The broker is concerned about the positive impact on GIANT BIOGENE (02367.HK)  -0.600 (-1.198%)    Short selling $34.23M; Ratio 28.721%   , Qifu Technology (QFIN.US)      and LENOVO GROUP (00992.HK)  -0.170 (-1.820%)    Short selling $160.77M; Ratio 14.706%   , as well as the negative impact on 3SBIO (01530.HK)  -0.060 (-1.029%)    Short selling $4.13M; Ratio 5.337%   , KB LAMINATES (01888.HK)  +0.110 (+1.528%)    Short selling $6.15M; Ratio 18.445%   , U-PRESID CHINA (00220.HK)  +0.100 (+1.408%)    Short selling $10.74M; Ratio 27.378%   and EB ENVIRONMENT (00257.HK)  -0.010 (-0.281%)    Short selling $8.15M; Ratio 28.444%   .

In terms of timing, all adjustments will be implemented after the market closes on 29 February and will take effect on 1 March. Based on the historical experience of index adjustments, passive funds usually choose the last day, 29 February, to adjust their positions in order to minimise tracking errors, so an unusually large revenue in stocks with large weightings, especially at the end of the day, is often observed, CICC noted.

In contrast, there is no constraint on active capital, which can choose the timing of its allocation, and the broker recommended paying attention to the potential impact of some less liquid stocks.

According to CICC, after the review results are announced but before they are formally implemented, there will be some arbitrage capital deployed based on the official results, especially in the case of unexpected results that were not fully predicted by the market.

Although passive funds are required to adjust their positions following the weighting changes on the official implementation date of the review, the actual share price movements during this period may not necessarily be in line with the direction of the weighting adjustments, but instead will be more affected by the strength of the contrast between early arbitrageurs and passive funds. The broker highlighted that there have been cases in which the share prices of newly admitted stocks or stocks with increased weightings fell on the implementation date of the adjustment.

(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-11-15 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)

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