MSCI Inc. has announced that it will remove 60 more Chinese stocks from its indexes in its latest quarterly review. This move comes after 66 and 56 deletions made in February and May respectively, marking the third large-scale removal of Chinese stocks from the MSCI Global Standard indexes this year.
On the other hand, the gap between investments in China and India is narrowing as MSCI adds seven Indian stocks to its list. The two additions are Huaneng Lancang, a state-owned hydropower firm, and Victory Giant, a circuit board manufacturer.
Among the Chinese stocks set to be struck off the indexes are CSSC Science & Technology Co. Ltd., a manufacturer of ship parts and steel structures, AVIC Industry-finance Holdings, a financial service firm, and media companies People.cn and China Film Group Corporation, all of which are state-backed firms.
These changes will also impact the MSCI All Country World Index and the MSCI Emerging-Markets Index. Additionally, the MSCI China-A onshore index and the MSCI China all shares index will see larger lists of stock removals.
Despite the significant cull of Chinese stocks, seven Indian stocks have been added to the MSCI indexes, contributing to a more balanced investment representation between the two countries.
This year, China experienced a net outflow of foreign direct investments for the second time since data tracking began in 1998. The third quarter of 2023 saw $12.1 billion of foreign direct investments withdrawn, resulting in a negative net figure. This followed a peak of $107.2 billion in net foreign direct investments in the first quarter of 2022.
In the first half of 2024, China recorded a net loss of $4.6 billion in foreign direct investments, with $14.8 billion outflows in the second quarter partially offset by a $10.2 billion gain in the first quarter.
This is the first time the semiannual figure has gone below zero. If this trend continues, 2024 will become the first year on record to witness a net outflow of foreign direct investments.
This outflow follows significant drops in foreign direct investments over the past two years, which amounted to only 22% of the 2022 figure and 12.4% of the peak net foreign direct investment in 2021, reaching $344.1 billion.