On May 13, Beijing time, the world's largest index company, MSCI, released the results of its semi-annual index review of 2020. After the adjustment, Luen Mei Holding is included into MSCI ACWI Index, China A Onshore Indexes and China All Shares Indexes, and is expected to see a larger increase in foreign capital inflow. The changes will take effect after the closing of the stock market on May 29, 2020.
The MSCI Index is the most influential stock index in the world and the most used benchmark index by portfolio managers. Over 90% of the world’s institutional investors refer to this index. The inclusion of stocks into MSCI means that they can be matched and bought by global investors.
China's share in the global market-value-weighted index is relatively low, at about 4%, and there is still much room for improvement. According to the arrangement for the inclusion into international indices, the inclusion of A-shares into major international indices will continue in the long term to gradually achieve 100% inclusion. Industrial Securities believes that the 100% inclusion of A-shares into MSCI will promote the inflow of foreign capital into A-shares. The scale of funds tracking A shares through MSCI Index will exceed $400 billion, of which about $86 billion are passive funds, which will attract more funds for A-shares.
As the level of internationalization of A-shares increases, the inflow of foreign capital into A-shares will continue in the long run. Companies with excellent performance and steady growth are expected to receive continuous inflow of off-exchange funds, thus realizing valuation reconstruction.
Since 2020, foreign capital has continuously built up its position size in Luen Mei Holding. As of May 12, Luen Mei Holding’ holdings in Shanghai Stock Link reached 13,553,800 shares, accounting for 0.59% of the total capitalization. In the past three months, a total of 9,279,900 shares have been scaled in Shanghai Stock Link, and the shareholding ratio has increased by 217.06%. After the adjustment, Luen Mei Holding has been included in the three major indices of MSCI, which means that it has been more appealing to global investment institutions for asset allocation, and it is expected to be automatically matched and bought by global investment institutions. It is expected that the proportion of foreign investors buying into Luen Mei Holding will increase significantly after the adjustment takes effect on May 29.
In 2019, Luen Mei Holding was included into FTSE Russell Expanded Constituent Stock and S&P Dow Jones Indices Constituent Stock. So far, Luen Mei Holding has been included into all major international indices constituent stocks.