(Yicai) June 4 -- Ten stocks were added to the MSCI China Index, such as Hisense Home Appliances Group and Citic Pacific Special Steel Group, and 56 removed on June 1 to reflect changing valuations.

The 10 newcomers to the MSCI China Index, which tracks the shares of large and mid-cap Chinese companies listed in the mainland, Hong Kong, and overseas, are mainly in auto parts, carbon steel, white goods, oil and gas, global index compiler MSCI’s quarterly review showed on May 14.

The businesses taken out of the index are in real estate, solar energy, medical services and devices, gaming and entertainment, and lithium. The share prices of nearly half of them have sunk by more than 20 percent this year, while over half had lower earnings last year, according to data from Choice.

Due to the downturn in Chinese stock markets, the number of constituents that New York-based MSCI has removed from its China index has hit an all-time high this year following two quarterly adjustments, shrinking it to 656 constituents from 766 at the end of last year.

As a result, China’s weighting in the MSCI Emerging Markets Index has fallen to 27 percent from 27.2 percent, resulting in passive outflows of USD500 million. Asian and global benchmarks were less affected.

China’s stock market has outperformed the rest of the world by more than 10 percent in its latest recovery, Goldman Sachs said in a recent report. Chinese equities should be re-included more quickly in future reviews, particularly because last year, MSCI increased the frequency to four time a year from two.

But after a bullish April, Chinese stocks have fallen back. The MSCI China Index and the CSI 300 Index, an index that tracks the top 300 mainland-listed stocks, dropped more than 6 percent and nearly 3 percent in the two weeks ended May 31, respectively, after reaching 52-week highs in the previous month.

The Hang Seng Index, the Hong Kong’s market’s main benchmark, rose 1.8 percent yesterday to close over 18,400. From its lowest closing level this year on Jan. 22 to its highest on May 20, the index climbed over 30 percent.

The Hang Seng is likely to stay between 18,000 and 18,500, as the upswing is not over while any declines are expected to be limited, the chief Hong Kong stock strategist at CCB International told Yicai. But to keep climbing next quarter, more government policy support will be needed along with an improving economy and earnings, the person said.

Editor: Emmi Laine