To The Moon

MSCI announced on August 12, 2024 the August 2024 quarterly adjustments for all of its indices, including the MSCI China Index.The following are the key adjustments to the MSCI China Index.

Constituent Adjustments

• Added 2 new constituents and removed 60 constituents.

• The 60 constituents removed include 5 Hong Kong stocks: $CTG DUTY-FREE(01880)$ $FLAT GLASS(06865)$ $GANFENGLITHIUM(01772)$ , $Guangfa Securities (01776)$ and $HYGEIA HEALTH(06078)$

• The number of constituents of the MSCI China Index has been reduced from 655 to 597, including 148 Hong Kong stocks with a weighting of 75.3% and 14 Chinese stocks with a weighting of 9.2%.

Adjustment of free float factor and number of included share capital

• Adjusted free float factor (FIF) for 15 companies

• Adjusted the number of equity shares included for 150 companies

• The above adjustments will result in a change in the weighting of these companies within the index

Weighting Change Impact

• $PDD Holdings Inc(PDD)$ $ICBC(01398)$ $ Huaneng Hydropower (600025)$, $POP MART(09992)$ and $ZIJIN MINING(02899)$ will see a 0.2% to 0.7% increase in weighting, which is positive.

• Companies like $Alibaba-SW(09988)$, $Tencent Holdings(00700)$, Hedgehog Healthcare and $Meituan-W(03690)$ will see their weightings decrease by 0.05% due to dilution or exclusion.weightings will fall by between 0.05% and 0.2%.

• Companies such as GF Securities, Ganfeng Lithium and Follett Glass will be negatively impacted

Adjustment Schedule

• All adjustments will be officially implemented after the close of trading on August 30, 2024

• Passive funds usually choose August 30 to make position adjustments, which may lead to abnormal amplification of trading in some stocks at the end of the day

• Active funds may choose appropriate allocation points according to their own strategies

• Some less liquid stocks may be potentially affected

Stock Price Impact

• Before the official implementation date, some arbitrage funds may lay out the corresponding stocks in advance according to the adjustment results

• However, the stock price movement may not necessarily be in the same direction as the weighting adjustment, but depends more on the strength of the early arbitrage funds versus the passive funds.

• Historically, there have been instances where newly included or weighted stocks have declined on the day the adjustment was implemented.