Recently, the British FTSE Russell Company announced that SMIC and Hikvision will be removed from the FTSE China A50 Index and the FTSE China 50 Index from January 7th!

FTSE China A50 is a common channel for foreign investors to enter China’s domestic stock market, while FTSE China 50 includes Chinese companies listed on the mainland and overseas.

FTSE Russell said in a statement that it will continue to closely monitor US sanctions and make further index adjustments if necessary.

Previously, the administration of President Trump issued an executive order on November 12, expressly prohibiting anyone in the United States from investing in Chinese companies that Washington believes is owned or controlled by the Chinese military. This order will take effect on January 11 next year.

As early as December 4, a spokesperson for the London Stock Exchange Group, the parent company of FTSE Russell, issued a statement after the stock close that it would give up shares in companies such as Hikvision, China Railway Construction and China Aerospace Satellite. The other five companies are China Communications Construction Co., Ltd., China Nuclear Engineering Construction Group Co., Ltd., CRRC Co., Ltd., Sugon Information Industry Co., Ltd. and China National Chemical Corporation.

In addition, FTSE Russell’s competitor, MSCI Index Company, issued a statement on December 15th, Eastern Time, stating that after the US government issued an order in November that US investors may not trade certain Chinese company stocks, it decided to put 10 Chinese companies  Stocks are removed from the portfolio of constituent stocks of the Global Investable Index Series, effective after trading closes on January 5. These stocks include SMIC H shares, China Communications Construction A shares and H shares, China Satellite, China Railway Construction A shares and H shares, CRRC A shares and H shares, Hikvision and Sugon.

Todd Rosenbluth, head of ETF and Mutual Fund Research at the Center for Financial Research and Analysis (CFRA), commented that so far, due to the limited number of large Chinese companies subject to restrictions, this removal has affected limitedly most U.S. investments.

JIM MCCAFFERTY, co-head of equity research at Nomura Securities Asia Pacific, said: “I think active funds, to a certain extent, they will not follow the sell-off, because the move to exclude Chinese companies is very political. Fundamental analysts will focus more on investing in the company’s revenue growth, earnings growth and prospects.”