(Yicai Global) May 15 -- Global index provider MSCI is adding another 51 Chinese mainland-listed companies to its MSCI China Index, as China significantly lowers the threshold for firms that qualify for its mainland-Hong Kong stock connect mechanism, in a move that could bring in almost CNY10 billion (USD1.4 billion) of passive tracking funds.

The adjustment will increase the weighting of mainland-listed stocks on the MSIC Emerging Markets Index to around 6 percent, and is expected to spur foreign capital to increase their allocation of mainland stocks, according to market estimates.

This is New York-based MSCI’s first quarterly adjustment since the Shanghai and Shenzhen Stock Exchanges reduced the market capitalization threshold for stocks participating in the two bourses’ stock connect programs with Hong Kong, which allow mainland and Hong Kong investors to trade stocks in each other’s markets through their home exchange, in March.

The threshold has been lowered to CNY5 billion (USD719.3 million), boosting the number of stocks eligible to trade on the Shanghai-Hong Kong Stock Connect to 1,193 from 595 and those on the Shenzhen-Hong Kong Stock Connect to 1,336 from 900. Only mainland-listed firms that meet these criteria can be inducted into the MSCI China Index.

Beijing-Shanghai High Speed Railway is the largest company by market value in the new offering, according to a list disclosed by MSCI on May 11. The state-owned railway operator’s stock [SHA:601816] closed up 0.9 percent at CNY5.56 (USD0.80) today, with a market capitalization of CNY273 billion (USD39.2 billion).

Other new inductees are photovoltaic giant Jinko Solar and state-owned power company SDIC Power Holdings. Meanwhile, 13 firms, including Sealand Securities, will be removed. The adjustments will take effect after trading ends on May 31.

MSCI has been hiking the weighting of mainland stocks in the Emerging Markets Index ever since they were first included in 2018. As of April 28, the MSCI China Index tracked 502 stocks with a total market capitalization of USD1.7 trillion. The net return is 2.5 percent year-to-date.

Editor: Kim Taylor