Futu Holdings Ltd. was included in the MSCI Hong Kong Small Cap Index. How to interpret it? | An article on popularizing science
Recently,MSCI (Ming Sheng) announced the half-year adjustment results for index constituent stocks.Futu Holdings Ltd. will be officially included in the MSCI Hong Kong Small Cap Index。
The index adjustments will take effect after the market closes on November 30, 2020.
Did you have a lot of questions when you saw this message, for example,
What is the MSCI Index?What standards can be included if they meet?What impact will it have on Futu?
1. What is the MSCI Index?
The MSCI Hong Kong Small Cap Index is a classification index of the MSCI series of indices.
The MSCI series is a series of hundreds of indices compiled by Morgan Stanley International Capital.
It tracks 75 major developed, emerging and cutting-edge markets around the world, and is used as an investment benchmark and tracked by a large number of international institutional investors.
The MSCI Index has a 50-year history.
Customers mainly include large institutional investors, mutual funds, investment banks and trading brokers, exchanges, investment advisors and financial media.
According to a research report previously issued by the China Securities Regulatory Commission:
“The MSCI Index has broad global influence. In North America and Asia, more than 90% of institutional international equity assets are already targeted by the MSCI Index.”
The MSCI Hong Kong Small Cap Index is an important indicator for tracking the performance of Hong Kong listed companies.
Picture｜MSCI half-year inspection press release
2. Why is Futu included in the MSCI Index?
Let's first take a look at MSCI's stock selection procedures and standards:
1) Company size:As in the past, MSCI would give priority to relatively large companies in the classification index.
Take the MSCI Hong Kong Small Cap Index as an example:
Companies included in the index include Xinyi Glass, which has a market capitalization of over HK$60 billion, and MGM China, which has a market value of over HK$40 billion.
2) Industry representation:In each category, MSCI will include listed companies in multiple industries, and they are generally representative of the industries they belong to.
For example, in the MSCI Hong Kong Small Cap Index:
Vitamin Milk, the leading dairy product in Hong Kong,Hang Lung Properties, the leading real estate company in Hong Kong, is on the list.Futu is also favored by MSCI as a Chinese internet brokerage firm.
It is worth noting:
MSCI also often selects listed companies that they think are currently undervalued but have unlimited potential in the later stages.
3) Stock Liquidity:After initial screening and classification of companies, MSCI will also consider the liquidity of listed companies' shares.
The indicators for measuring liquidity are quite diverse to ensure that the companies to be included meet the requirements in all aspects.
Specifically, it includes the average monthly transaction amount, average monthly transaction ratio, transaction frequency, etc.
Overall, Futu can be included in the MSCI Hong Kong Small Cap Index, which means that the company has passed MSCI's hierarchical screening。
It has been recognized by MSCI in terms of company size, industry position, and stock circulation.
It also shows international investors' affirmation of Futu's investment value, comprehensive business strength, and development prospects.
Figure | Futu Holdings Ltd. is included in the MSCI Index
3. What is the impact of being included in the MSCI Index?
The MSCI series index is one of the most used benchmark indices by international investors。
A large number of index funds, active funds, passive funds, etc. track these indices.
As of 2019, the global assets tracking the MSCI series of indices reached US$13.1 trillion.
The MSCI Index undergoes quarterly and semi-annual adjustments every year to add or remove constituent stocks to ensure the authority of the index.
Every time there is a change in inclusion in the list after the quarterly inspection or semi-annual inspection results are released, it will trigger a large flow of capital.
Index constituent stocks will also receive more passive capital to attract the attention of actively managed funds.Initiate a new round of asset allocation。
The half of the year was more comprehensive than the quarter, and the adjustment was relatively large.
Reference:
Note: There are other specific rules and strategies that need to be built on independence by the author or author. The Futu Power Company shall not guarantee the above tolerability and reliability, and shall not indemnify any loss or damage arising from any failure to comply with or misuse.
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