Involving A-shares and Hong Kong stocks! Major index adjustments are coming! How significant will the impact be?

As recent fluctuations in the relevant sectors of the A-shares and Hong Kong stock markets have occurred, FTSE Russell announced the preliminary results of the semi-annual review of the global equity index series for March 2026. The related adjustments will officially take effect after the close on March 20.

FTSE Russell is the world’s second-largest index provider. Its index products cover markets in over 70 countries and regions worldwide. They are important tools for investors to observe the market, and are crucial for developing investment strategies and risk management. In this index review, 77 stocks were added to the large-cap list, while 38 stocks were removed from it.

Resource and Technology Stocks Rise to Large-Cap Camp

In this adjustment, resource and technology stocks emerged as the biggest winners, with several stocks promoted from mid-cap and small-cap to large-cap.

Specifically, resource stocks such as Silvercorp Metals, Shengtun Mining, Yunnan Copper, and Tungsten High-tech have been promoted to large-cap status as their share prices and market values continue to rise.

Regarding the strong performance of resource stocks in recent years, China International Capital Corporation (CICC) believes that, in recent years, the reshaping of the global trade landscape and geopolitical events like the Russia-Ukraine conflict have increased commodity market uncertainties. As financialization deepens, the correlation between commodity futures and stock returns, as well as cross-market risk transmission mechanisms, have significantly strengthened. At this point, pricing logic is no longer limited to supply and demand fundamentals; geopolitical risks, supply chain security, and policy factors have become more influential, leading to high volatility in commodity prices under certain shocks. For example, in this market cycle, silver, which has strong financial attributes, has shown price elasticity exceeding that of related stocks at certain stages.

CICC further notes that commodities benefit from diversified global capital. Currently, valuations and costs for energy and chemical commodities may be at or near bottom levels. Despite short-term volatility, the expanding AI computing power and energy transition-driven rigid demand, along with structural supply-demand gaps in some commodities, have not fundamentally changed. The structural trend in commodities may still be ongoing.

The technology sector also shines brightly. Companies like Chunzhong Technology, Byte Storage, Yandong Micro, and China Science & Technology Map, with rising share prices, have been included in the large-cap list. CITIC Securities research states that the evolution of AI models and applications demands higher underlying computing power, driving continuous growth in data center GPUs, HPC, storage, and servers. Meanwhile, industry leaders secure long-term contracts, maintain high capital expenditure and order visibility, further strengthening the predictability of their performance. Under the market’s “prioritizing high certainty of performance” style, sectors benefiting directly from high-growth AI computing demand with solid fundamentals are likely to continue outperforming and attracting capital, forming the main trading logic for the current and near-future technology sector.

In addition, some emerging industry stocks are also gaining prominence. For example, Guming, a leading brand in the new tea beverage industry, has gained a foothold in the consumer market with its unique brand positioning and extensive store network, and continues to be favored in the capital markets.

In stark contrast to the strong rise of resource and tech stocks, some traditional industry stocks have been removed from the large-cap list due to poor stock performance. Stocks like Chongqing Brewery, China Resources Medical, Hodo Group, and Hualan Biological have been reclassified from large-cap to mid-cap.

How Significant Is the Impact?

As one of the world’s important stock indices, the FTSE global equity index series’ adjustments to the large-cap list serve as a market indicator. The concentrated inclusion of resource and technology stocks will attract passive funds into these sectors, driving stock prices higher and boosting overall sector valuations.

Goldman Sachs analysts indicate that this FTSE index adjustment is expected to trigger over $27 billion in total capital flows. China and South Korea are the largest net inflow regions, while Japan faces significant outflows.

Liquidity is a key perspective in observing index adjustments. Goldman Sachs expects this adjustment to trigger over $15 billion in two-way capital flows in the Asia-Pacific markets. Regarding net inflows, China emerges as the biggest winner, with an estimated $1.3 billion in passive fund inflows, ranking first in Asia-Pacific; South Korea follows with about $400 million in net inflows; Japan is expected to face about $1.6 billion in net outflows, making it the region under the most capital pressure.

In recent years, more investors have been paying attention to the Chinese stock market.

In 2016, FTSE Russell was the first to launch the FTSE China A-share Connect Index series, and in response to the rapid development of the Shenzhen ChiNext, introduced the China A-share Innovative Enterprise Index to capture opportunities in emerging industries.

In 2018, FTSE Russell launched the FTSE Global China Stocks Connect Index, aiming to comprehensively reflect the performance of large- and mid-cap Chinese companies listed in China or overseas. The index covers all major Chinese stock categories, including A-shares, B-shares, H-shares, Red Chips, P-shares, S-shares, and N-shares, with 1,058 constituents and a total investable market value exceeding $3 trillion. It is used by Vanguard for Hong Kong ETFs, further promoting deep integration of China’s market with global capital.

FTSE Russell actively adapts to market development by including eligible Chinese stocks and bonds into its global index system. In 2020, Chinese A-shares were officially included in the FTSE Global Equity Index. After inclusion, the FTSE Emerging Markets All Cap Index incorporated 25% of A-shares, covering 1,051 large-, mid-, and small-cap A-shares, becoming the first international index provider to cover companies of different sizes during the inclusion process. In 2021, FTSE Russell expanded into fixed income, gradually including Chinese government bonds into the FTSE World Government Bond Index (WGBI) and related indices, promoting the internationalization of China’s bond market.

(Source: Securities Times)