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Nov 15, 2015

MSCI rule change allows 14 major Chinese companies to join main indexes

Baidu and Alibaba to join MSCI Emerging Markets Index

Index provider MSCI will include the ADRs of Alibaba, Baidu, NetEase and 11 other US-traded stocks in some of its largest indexes after changing internal rules. The change allows stocks to be included in certain indexes for countries in which the companies operate, rather than just the country they’re listed in.

The companies, which also include JD.com, Vipshop and Ctrip, can be included in the MSCI China Index and the MSCI Emerging Markets Index, the provider says. The rule change will also affect several companies from the Netherlands, Hong Kong and Israel.

‘MSCI will first add the foreign-listed companies at half of their free-float‐adjusted market capitalization at the November 2015 semi‐annual index review and will subsequently add their remaining free-float‐adjusted market capitalization at the May 2016 semi‐annual index review,’ the firm says in a press release.

MSCI made the announcement in its latest review, in which it added 74 securities, including 21 foreign-listed firms, to the MSCI ACWI Index and deleted 60.

The three largest additions to the MSCI Emerging Markets Index, measured by current market capitalizations, will be Alibaba and Baidu from China and the Emirates Telecommunications Corporation from the United Arab Emirates, MSCI says. The three largest firms to be added to the MSCI World Index are NXP Semiconductors from the Netherlands, Hongkong Land and Israel’s Check Point Software.

The MSCI China A Indexes will see 228 additions and two deletions. The three largest companies to join the index are Jiangsu Shagang Co, Jiangyin Zhongnan Heavy Industries and Wuhu Shunrong Sanqi. The MSCI Global Islamic Indexes will lose 41 securities and gain 33, including Alexion Pharmaceuticals and Celanese Corporation from the US, and Brenntag from Germany.