Several major Hong Kong-listed mainland stocks fell more than 10 per cent yesterday after fund managers made a flurry of last-minute trades to reflect a rebalancing in the MSCI China Index.
China Southern Airlines and China Eastern Airlines Corp, two stocks that have been dropped from the benchmark, fell 12.63 and 10.96 per cent respectively, with most of the losses coming in the final 10 minutes of trading during the auction period.
Guangzhou Investment shed 11.11 per cent, Citic Resources Holdings slid 13.73 per cent while Hopson Development Holdings lost 10.14 per cent. All three stocks will be deleted from the index.
'Tracker funds have to match up the switches,' said Kenny Tang Sing-hing, an executive director of Redford Asset Management. 'And so they always push up or pull down share prices during the closing auction session due to the abnormal sale turnover.'
The MSCI, an equity index compiler, announced in its semi-annual review earlier this month that six stocks would be added to its mainland benchmark and nine would be deleted.
The changes will be effective today when trading begins.
Fund managers linking their portfolios to the benchmark usually reallocate their positions after the market close before the effective day so that they can most accurately track the performance of the benchmark.