Stock selection considers the following factors:
(1) Company size. MSCI calculates the market value of each stock after free circulation adjustment as a representation of the company size, including defining and estimating the number of shares that foreign investors can invest in each stock, giving each stock a free circulation adjustment factor and calculating the market value after free circulation adjustment.
(2) Industry representativeness. MSCI adopts the global industry classification standard jointly formulated by Standard & Poor's and MSCI*** to classify listed companies. This classification is the most widely used standard in the investment field. It adopts the market demand-oriented method to classify companies, and those companies that provide customers with similar products and services are classified into one category. The classification standard divides the market into 10 economic sectors, 23 industry groups, 59 industries and 123 sub-industries, such as energy, materials, industrial products, major consumer goods, optional consumer goods, medical care, finance, information technology, telecommunications services and public utilities. MSCI aims to cover 85% of the adjusted market value of each industry in each country. A few countries can't meet this standard because of the lack of large-scale and mobile companies. MSCI will analyze the company's business activities and the diversity it brings to the index, and build the index in a bottom-up way, that is, at the industry level, as many companies as possible will join the index under the principle of meeting 85% market value.
(3) liquidity. Liquidity is an important but not the only factor in deciding whether to be selected. Consider a series of relative and absolute liquidity indicators when selecting samples, including monthly average transaction amount, monthly average transaction ratio (transaction amount/adjusted market value of free circulation), transaction frequency (including trading days) and so on. (1) defines the sample space. MSCI compiles indexes according to countries (or regions), and each company belongs to only one country (or region) for each country.
(2) For each listed company in this country (region), determine the market value (free market value) of the company's shares that international investors can freely buy and sell and circulate abroad.
(3) Classify listed companies according to global industry classification standards.
(4)MSCI adopts the bottom-up method to construct the index, that is, at the industry level, the stocks with large free-floating market value are added in turn, so that the free-floating market value of the selected stocks in each industry reaches 85% of the industry.
(5) Fine-tune selected stocks in various industries, so that the market value of free circulation of selected stocks can reach more than 85% of the whole market. An important reason why MSCI is widely cited by international investors is the investability of its index compilation, that is, it is weighted according to the market value of companies that international investors can freely invest in, so investors can easily copy it. MSCI defines the proportion of free circulation as the proportion of shares that international investors can buy and sell in the open securities market. Restrictions include strategic shareholding and restrictions on foreigners' shareholding. MSCI's estimation of free circulation is only based on public shareholding information.
The determination of the market value of the company that international investors can freely invest in (free circulation market value) is completed through the following steps:
(1) defines the estimated free circulation ratio. For stocks without foreign ownership restrictions (FOLS)? The number of freely tradable shares is estimated as the number of tradable shares MINUS strategic holdings and other non-freely tradable shares, including? Cross-shareholding; ? Shares held by the founder, family and senior management of Company B for a long time; ? C restricting employee stock ownership; ? D state-owned shares; ? E part of strategic investors hold shares; ? F. freeze shares according to law. For stocks with FOLS, the number of freely circulating shares is the smaller of the following two: the number of freely circulating shares, the upper limit of foreign ownership MINUS the non-freely circulating part of foreign ownership.
(2) Give each stock a free circulation adjustment factor, which is called foreign inclusion factor (FIF). Case 1: The proportion of free circulation is greater than 15%, and there is no restriction on foreign shareholding: the proportion of free circulation is an integer multiple of the nearest 5%. Case 2: The proportion of free circulation is less than 15%, and there is no restriction on the ratio of foreign shares: the proportion of free circulation is the nearest integer multiple of 1%. Case 3: there are restrictions on foreign shareholding: FIF takes the smaller of the following two: the estimated free circulation ratio that foreign investors can hold: if it is greater than 15%, take the nearest integer multiple of 5%; If the value is less than 15%, take the nearest integer multiple of 1%. The upper limit of foreign shareholding minus the non-free tradable shares held by foreign investors is the closest integer multiple of 1%. Scenario 4: Other restrictions on foreign investment: If other restrictions on foreign investment affect the effective implementation of foreign investment, an adjustment factor, called LIF, will be added to adjust the adjustment factor for the free circulation of foreign investment.
(3) Calculate the free circulation adjusted market value according to the free circulation adjustment coefficient (total market value multiplied by the free circulation adjustment coefficient). (1) Minimum size limit. In order to make the selected stocks have certain liquidity and ensure the reproducibility of investors, MSCI stipulates that the selected sample stocks must have a certain scale (free market value). When determining the minimum size of a country or region, MSCI will consider the following factors: the size of the free-floating market value of the whole market, and the distribution of the free-floating market value of the stocks in this market will be added to the change of the proportion of the stocks with the largest free-floating market value in the whole market in turn; Concentration level of market value in free market circulation.
(2) The proportion of free circulation is less than 15%.
The free circulation ratio of a stock is less than 15%. To join the index, one of the following conditions must be met: 10 basis points representing MSCI World Index or 15 basis points representing MSCI EMF Index. It accounts for 5% of the freely circulating market value of the country's index. The process of opening Taiwan Province's securities market to foreign investment is as follows:
1988 allows foreign securities companies to set up branches in Taiwan Province, entrusted to buy and sell overseas securities;
1990, opening overseas professional investment institutions to invest in domestic securities;
1993 open foreign securities companies to engage in securities business in the local market of Taiwan Province province;
1996, overseas legal persons and natural persons can directly invest in Taiwan Province stock market (with limited shares);
In 2000, the restrictions on single and all foreign listed companies in Taiwan Province Province were lifted.
MSCI has compiled the MSCI Taiwan Province Province Index since 1988, which reflects the performance of the overall stock market in Taiwan Province Province. However, considering the development of Taiwan Province market and more restrictions on foreign investment, MSCI has only included Taiwan Province stock index in its freedom index since September 2 1996, and the calculation ratio is only 50%. 199 12 In August, MSCI announced that it would increase the proportion of Taiwan Province Province from 50% to 100%, which will take effect after February 2000. The above decision is mainly due to MSCI's belief that the upper limit of single or all foreign-invested listed (OTC) companies in Taiwan Province Province has been raised to 50%, and the management measures for foreign investment in Taiwan Province Province, including pre-investment application procedures, are similar to those in other countries in the region, but not stricter than those in other countries, so the proportion of Taiwan Province Province included in the series index has been readjusted. The indexes affected by the above adjustments mainly include: MSCI Emerging Market Freedom Index, MSCI All Countries (AC) Far East Free Japan Index and MSCI All Countries (AC) Freedom Index. Generally speaking, the impact of this adjustment is very obvious. By the end of June, 2000, the accumulated net foreign investment was $22.9 billion, of which/kloc-0 was $6,543.8+8 billion, $2 billion, $6,543.8+9 billion, $700 million, $400 million and $500 million from October to June respectively. As far as the amount of foreign investors buying and selling listed stocks is concerned, by the end of June 2000, all foreign investors had bought more than 1? 27.2 billion yuan, of which the monthly turnover in1-June was 55.8 billion yuan, 46.3 billion yuan, 44.8 billion yuan, 48.7 billion yuan, 9.3 billion yuan and 654.38+09.7 billion yuan respectively. It shows that the overall trend is stable and increasing, except for the decline in April and May due to the influence of American and global stock markets. As of September 2002, the net inflow of foreign capital reached $35.66 billion.
MSCI index is an important reference standard for global institutional investors, especially passive investors who follow the index. When MSCI increased the calculation proportion of Taiwan Province stocks, the weight of Taiwan Province stocks in MSCI related indexes also increased relatively, which led to a large number of international funds investing in Taiwan Province stock market, which played an important role in the internationalization of active market and Taiwan Province stock market and improving the investor structure of Taiwan Province stock market. MSCI Taiwan Province Index also promoted the development of related index derivatives. The earliest Taiwan Province stock index product, Taiwan Province stock index futures, was listed on the Singapore International Financial Exchange on 1998. This product is based on Morgan Stanley Capital International Taiwan Province Province Index. On May 2nd, 20001,HKEx launched iShares MSCI Taiwan Province Index Fund and related ETF products, and some related index products were listed and traded in the United States. This has played a very good role in increasing foreign investors' understanding of the local market and promoting the development of the securities market. The experience of South Korea also illustrates the influence of MSCI index. 1In February 1998, MSCI adjusted the calculation weight of the Korean stock market from 50% to 100%, which made international funds flow to the Korean stock market and the Korean stock market rose by nearly 80%. 1.MSCI China Foreign Free Investment Index In view of the rapid development of China's economy, China's economy has attracted increasing international attention. In order to meet the needs of foreign investors, MSCI compiled the MSCI China Foreign Free Investment Index. (1) Basic information. Morgan Stanley Capital International China Free Foreign Investment Index aims to represent China companies that foreign investors can invest in. MSCI China Foreign Free Investment Index is calculated in Hong Kong dollars, calculated and published in real time every 15 seconds during the trading hours of the Stock Exchange. (2) Qualified stocks. Global securities eligible for inclusion in the MSCI China Free Foreign Investment Index include the constituent stocks of the MSCI China Index, the securities listed in Hong Kong in the form of H shares (in Hong Kong dollars), the securities listed in new york in the form of N shares (in US dollars), or corporate securities that meet both of the following conditions:? A A A company incorporated in the Hong Kong Special Administrative Region and listed on the Stock Exchange of Hong Kong is a wholly-owned subsidiary of the Stock Exchange of Hong Kong. ? B its main shareholder (directly or indirectly) is a national, provincial or municipal organization or enterprise in People's Republic of China (PRC) (China), or a company incorporated in China. (3) compiling standards. MSCI compiles the MSCI China Free Investment Index according to the index compiling method applicable to the global MSCI standard index, which can be summarized as four simple steps:? A define the whole stock market-China market? B. Adjust the total market value of all securities in the overall market of China according to the public shareholding of foreign investors. ? C The securities market is classified according to the Global Industry Classification Standard (GICS). ? D. According to the compilation standards and guidelines of MSCI index, select the securities that can be included in the index, including: aiming at 85% of the adjusted market value of public ownership in each country and industry group; Choose securities with considerable market value, strong liquidity and public ownership. (4) Basic characteristics of sample stocks. MSCI generally chooses stocks with large scale and good liquidity. Sample stocks of MSCI China Foreign Free Investment Index include leading stocks of China Mobile, China Unicom and China Petrochemical.
2. Possibility of China's inclusion in MSCI index (1) Basic situation of securities market and compilation of MSCI index. According to the minimum size limit set by MSCI (10 billion US dollars), all stocks that meet this condition account for less than 50% of the domestic securities market, which is far from the target of 85% set by MSCI. However, considering that the standard is set at 200 1 and the market value of stocks has generally declined recently, if the minimum sample size of MSCI China Foreign Free Investment Index (464 million yuan) is taken as the benchmark, the total size of qualified stocks accounts for 72.66% of the market, which is close to the target set by MSCI. With the listing of large-cap stocks of state-owned enterprises and the continuous relaxation of foreign investment restrictions, it should not be difficult to reach or approach the quantitative stock selection index set by MSCI. (2) Possibility of China being included in MSCI index. Does MSCI include a country in the emerging market index system and compile its national index? Mainly considering the gross domestic product (GDP) per capita, market depth and liquidity, local government supervision, perceived investment risk, foreign ownership restrictions and capital controls on foreign investors, and the general perception of the investment community and other factors, China's GDP per capita has reached a certain level and developed at a high speed (it can be seen that GDP per capita is not an obstacle to MSCI's index compilation). As can be seen from the above, the foreign capital capacity of China's securities market is also very large, and the liquidity of the domestic market is also good. Therefore, at present, the main obstacles to China's inclusion in MSCI index are not quantitative factors such as scale, but some institutional factors such as domestic investment environment and policies, such as the proportion of non-tradable shares, access to basic information, restrictions on the shareholding ratio of foreign investors, the quality of information disclosure, corporate governance, regulatory policies, capital account opening, exchange rate, etc. With the continuous development of China's securities market and the continuous improvement of its opening to the outside world, more and more foreign investors will invest in China's securities market. As the most famous international index compiling company, MSCI will naturally not ignore the China stock market with great potential. MSCI has always attached importance to the China market. In order to meet the investment needs of investors in Asia, especially in Greater China, on June 1 day, 2000, MSCI announced that it would provide two new Asian regional indices: MSCI China Index and Jinlong Index. China Index consists of MSCI China Foreign Free Investment Index and MSCI Hong Kong, and Jinlong Index consists of MSCI China and MSCI Taiwan Province Province (the market weight of Taiwan Province Province is 65%). The position of a country in the MSCI series index is so important that it is unprecedented in the MSCI index. At present, the scale and system of China's securities market are larger and more perfect than that of Taiwan Province Province in 1980s. With the opening of the domestic securities market, MSCI will launch the MSCI domestic securities market index to meet the needs of investors. We should also actively promote China's securities market and promote the early realization of this process. However, in order to promote the implementation of QFII and accelerate the internationalization of China market, it is only one of the means to include China market in MSCI index. The key is to do a good job in China's own index and index products, including the experience and lessons of Hongkong, Singapore, Taiwan Province and other markets. Establishing an authoritative index system is an important issue related to the long-term development of the market.