MSCI raised standards, adding no new HK stocks and removing six in the latest update.

On August 12,The largest domestic foreign exchange trading company MSCI Inc. announced the results of the August 2024 MSCI Index Quarterly Review, which will take effect after the market closes on August 30. In this adjustment, 27 new stocks were added to the MSCI Global Standard Index, while 96 securities were removed.

Among the stocks added to the MSCI Global Standard Index, the three largest companies by market value are Switzerland's Galderma Group, Denmark's Zealand Pharma, and Sweden's Addtech B. Additionally, changes were made to the MSCI Emerging Markets Index, with the largest three newly included stocks being Brazil's Nu Holdings, China's Huaneng Hydropower A, and UAE's Adnoc Drilling.

In this review, the MSCI Global Standard Index included two new A-shares from China but removed 60 stocks, including five Hong Kong stocks. The five removed Hong Kong stocks are China Duty Free Group, Flat Glass, Ganfeng Lithium, GF Securities, and Hygeia Healthcare. Furthermore, Swire Properties was also removed from the Hong Kong region.

For the MSCI Global Small Cap Index, six new stocks from China were added, five of which are Hong Kong stocks: Evergrande Property Services, Hygeia Healthcare, Maanshan Iron & Steel, RemeGen, and Konnect Optical, and one U.S.-listed China stock called Atour. Additionally, 12 stocks were removed, 11 of which are Hong Kong stocks, including GCL New Energy, Pharmaron, and Changzhou Xingyu Automotive Lighting. Meanwhile, five new Hong Kong stocks were added, and three were removed from the Hong Kong region.

The inclusion criteria for the MSCI Index have been raised again. As of July 18, 2024, the minimum threshold for inclusion in the MSCI Global Investable Market Index is a total market capitalization of HKD 3.4 billion and a free float market capitalization of HKD 1.7 billion. Compared to the last quarterly review, the threshold has increased by approximately 10%.

It is noteworthy that some companies with relatively ample market value and liquidity, while excluded from the standard indices, were not included in the small-cap indices. This may be related to MSCI's inclusion factors for A-shares, the proportion of strategic shareholder holdings, and the maximum remaining holding ratio for foreign investors.

For example, among the excluded stocks GCL New Energy and Changzhou Xingyu Automotive Lighting, GCL New Energy insiders hold more than 50%, thus failing to meet the minimum free float market capitalization threshold; while Changzhou Xingyu Automotive Lighting is listed on the "highly concentrated ownership" list, its actual free float market capitalization also fails to meet the standard.

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