Com­pa­nies re­moved from in­dex may have to wait at least 12 months for rein­clu­sion

New Straits Times - - Business / World -


BARELY a month af­ter ap­prov­ing the in­clu­sion of Chi­nese shares in its bench­mark emerg­ing mar­ket in­dex, MSCI is warn­ing that com­pa­nies in China that sus­pend trad­ing in their shares for too long risk be­ing dropped.

MSCI head of re­search for Asia Pa­cific, Chin Ping Chia, said China was an out­lier in global mar­kets with too many sus­pen­sions in stock trad­ing.

He said the in­dex provider was closely mon­i­tor­ing the 222 China-listed A-shares that would be added to its Emerg­ing Mar­kets In­dex next year.

“If we find a com­pany sus­pends for a long time, over 50 days, we will re­move it from the in­dex, and we will not bring it back to the in­dex again for at least another 12 months,” said Chin.

The 12-month re­moval rule would be lim­ited to Chi­nese com­pa­nies. Firms from other mar­kets who were re­moved from the in­dex due to a long sus­pen­sion of trad­ing would be able to start a re­view process for rein­clu­sion once they re­sumed trad­ing.

MSCI’s com­ments come as the num­ber of sus­pended stocks in China is at its high­est level in a year af­ter volatil­ity in smaller com­pa­nies prompted many to halt share trad­ing in or­der to avert a crash in prices.

Sus­pen­sions have also in­creased among com­pa­nies with larger cap­i­tal­i­sa­tion as Bei­jing steps up con­sol­i­da­tion of sta­te­owned en­ter­prises.

An av­er­age of 265, or one in ev­ery 13, listed com­pa­nies in China sus­pended trade last month, ac­cord­ing to data pro­vided by ZBen Ad­vi­sors.

The con­sul­tancy said the num­ber had risen ev­ery month this year and was up 30 per cent from an av­er­age of 202 in Jan­uary.

Last year, MSCI cited ar­bi­trary and long sus­pen­sions as a rea­son for ve­to­ing the in­clu­sion of shares listed on the main­land in its bench­mark in­dices.

“This sus­pen­sion is­sue in China is highly unique, both in the num­ber and fre­quency,” said Chin.

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