To The Moon

Last week, MSCI announced the results of the August quarterly index review for all indices. The adjustments to the MSCI China Index include the addition of 29 new stocks and the removal of 19 stocks. Changes in the Hong Kong stock segment are as follows:

Constituents

- Added 1 stock: $SINOTRUK(03808)$

- Removed 5 stocks: $PHARMARON(03759)$ $TIGERMED(03347)$ , $SHANGHAI FUDAN(01385)$ , $GREENTOWN SER(02869)$ and $CHINA LESSO(02128)$ .

Weights

The total number of constituents after the adjustments has risen to 766, including 556 A-shares with a weight of 16.1%, 188 Hong Kong stocks with a weight of 76.1%, and 19 Chinese concept stocks with a weight of 7.6%.

Additionally, the free float factors of 25 companies and the inclusion share counts of 214 companies have been adjusted, resulting in changes to the weights of constituents within the index.

Impacts

Positive Money Inflows: The weight increases for $Tencent(00700)$ , $Pinduoduo Inc.(PDD)$ $ICBC(01398)$ , $PING AN(02318)$ , $SINOTRUK(03808)$ , and $BYD COMPANY(01211)$ are prominently positioned.

Negative Outflows: $Alibaba(09988)$ $NTES-S(09999)$ , $MEITUAN-W(03690)$ , have experienced significant declines in index weight due to dilution or exclusion.

All adjustments will be implemented after the market close on August 31st and will officially take effect on September 1st.

Based on historical experience with index adjustments, passive funds tend to rebalance on the last day, which is August 31st, to minimize tracking errors.

Consequently, there is often an "unusual" amplification of trading volumes for stocks with significant weight changes, particularly during the closing period. In contrast, active funds are not bound by this constraint and can opportunistically choose their allocation timing.

Funds

Last week, Northbound capital outflows reached a new high since October 2022. Meanwhile, Southbound inflows were positive until Friday but experienced significant selling on that day, resulting in a slight outflow of 574 million yuan for