China Index Rebalancing to Trigger $48 Billion in Passive Investment Flows, Goldman Sachs Estimates
China's Index Rebalancing to Trigger $48 Billion in Passive Investment Flows
Shanghai, China - China's planned rebalancing of indexes is expected to trigger an estimated $48 billion in two-way passive investment flows, according to Goldman Sachs. The major indexes are undergoing semi-annual adjustments later this month, which will have a significant impact on the market.
The China Securities Index Co and the Shenzhen Securities Information Co announced the semi-annual index review results for key CSI and CNI indexes after the market close on Friday. The constituents of large-cap index CSI 300, mid-cap index CSI 500, and small-cap index CSI 1000 will be adjusted at the close of trading on June 12, according to China Securities Index Co. Similarly, adjustments will also be made to indexes including the SSE 50, the SSE 180, and the STAR 50.
The Shenzhen Securities Information Co said in a separate statement that constituents of the Shenzhen Component Index, ChiNext Index, Shenzhen 100 Index, and ChiNext 50 Index will be adjusted on June 15. The index adjustments will increase the representation of information technology, telecommunications, and industrial companies.
According to Goldman Sachs, beneficiaries from potential net inflows include Huagong Tech Co, Yuanjie Semiconductor Technology Co, and Hua Hong Semiconductor Ltd. The bank estimates that the major CSI and CNI index rebalancing will generate over $48 billion in gross two-way passive flows.
| Companies Expected to Benefit from Passive Inflows | Companies Expected to Face Passive Outflows |
|---|---|
| GigaDevice | Beijing-Shanghai High Speed Railway |
| VeriSilicon | Hengtong Optic-Electric Co |
| Piotech | Shaanxi Coal |
| Zhejiang Century Huatong | Haier Smart Home Co |
On the other hand, stocks facing the largest passive outflows due to index deletions are expected to include Beijing-Shanghai High Speed Railway, Hengtong Optic-Electric Co, Shaanxi Coal, and Haier Smart Home Co. The index adjustments are intended to better align the benchmarks with China's national development priorities and strategic industries.
Investor Takeaway
Investors should be aware of potential passive investment flows triggered by China's index rebalancing.
More in Market
SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire
Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
