MSCI has followed FTSE Russell and S&P Dow Jones Indices in removing Chinese companies from its indices following an order from President Trump to ban US investors from owning their shares.
Effective 5 January 2021, China Railway Construction, China Spacesat, China Communications Construction., CRRC, Hangzhou Hikvision Digital Technology, Dawning Information Industry. and Semiconductor Manufacturing International will be removed from MSCI indices.
The decision comes a month after the firm launched a consultation with the market about the impact Trump’s decision would have on their investment process.
MSCI said it received more than 100 market participants who said the move from the White House would have “significant impact” on their investment processes.
Trump’s executive order, which was issued on 12 November, bans US investors from buying a number of Chinese companies which the administration believes aid China’s military and “directly threaten” US national security.
With the three biggest index providers all removing the banned companies from their indices, it shows how effective an order of this kind can be.
However, it is likely the impact will be extremely minimal for investors with the companies accounting for 0.04% of the MSCI ACWI IMI and 0.28% of the MSCI EM IMI.