London, Monday, February 12, 2024 – Global index provider MSCI announced on Monday, February 12, a shakeup of its flagship MSCI-China Index and said it had removed 66 companies deemed non-compliant with its sustainability criteria.
This is the largest single-quarter removal in at least two years and reflects the ongoing struggles of Chinese equities.
MSCI said in its February 2024 Index Review 1 that the removed companies, representing a combined market capitalization of roughly $140 billion, were flagged for non-compliance with MSCI’s environmental, social, and governance (ESG) standards.
This move, taking effect on February 29, 2024, is expected to impact exchange-traded funds (ETFs) and other passive investment vehicles tracking the MSCI China Index.
Analysts pointed out that the removals might exert further pressure on Chinese stocks in the near term.
However, some view it as a positive step for long-term market development by encouraging transparency and compliance with ESG principles.
This also indicates a continuation of the global investor trend of reevaluating China’s exposure in the face of rising economic and regulatory uncertainties.
Concerns about the Chinese market have been mounting in recent times, with the property sector facing headwinds and weak consumer spending dampening investor sentiment.
Additionally, global investors are reassessing their exposure to China amid growing economic and regulatory uncertainties.
Morgan Stanley Capital International (MSCI) is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.
