Instant View: S&P DJI to remove Chinese firms from equity, bond indices

FILE PHOTO: Surveillance cameras are seen near the headquarters of Chinese video surveillance firm Hikvision in Hangzhou, Zhejiang province, China May 22, 2019. REUTERS/Stringer

SINGAPORE (Reuters) – S&P Dow Jones Indices said on Thursday it would remove 10 Chinese companies from its equities indices, including Hikvision and SMIC, following a Trump administration order prohibiting purchases by U.S. investors of certain Chinese securities.

These securities will be deemed ineligible from equity indices prior to the market open on Dec. 21, S&P DJI said.

It will also remove certain securities issued by additional Chinese companies in its fixed income indices prior to the open on Jan. 1.

Following are analysts’ comments:

KIYOSHI ISHIGANE, CHIEF FUND MANAGER AT MITSUBISHI UFJ KOKUSAI ASSET MANAGEMENT, TOKYO:

“Funds that follow those indices will have to sell. This goes beyond the routine annual changes to names on the index. For Japan, the outstanding balance of passive funds is much larger than active funds, so the impact is quite significant.

“Once the passive funds start selling, the active funds will be inclined to do the same. There is still some time before these changes take effect, so investors can reduce their positions gradually, but the net effect is the same.

“The measures taken against SMIC are quite harsh. This is basically designed to prevent them from making semiconductors.

“I expect some investors will even go so far as to redeem some of their investments, but I’m not overly worried because there is still a lot of quality Chinese names to invest in.”

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