Feb 13, 2019 (China Knowledge) - 17 companies from across the world will be added to MSCI’s gauges with the majority coming from China. Taiwan and Europe will each see one stock being added while the US will have three stocks added and one removed.

Some of the newly included Chinese companies included smartphone manufacturer Xiaomi, online video platform iQiyi, food delivery giant Meituan-Dianping, music streaming company Tencent Music and video sharing site Bilibili.

These stocks will be included into the MSCI China Index by the end of February and will benefit these companies in the long term as their inclusion will attract global funds that seek to track these indices. These funds typically do not buy or sell stocks on a short-term basis and their participation will help to reduce oversupply in the market and bring about long-term stability of its share price.

The MSCI China Index currently includes 459 constituents which accounts for 85% of the country’s equities and represents large and mid-cap stocks.

While the inclusion is a boon for these companies in the long-term, from a short-term perspective, this may lead to a temporary increase in volatility for the stock as investors who bought into these stocks expecting their inclusion may start to exit and take profits on the announcement.

One thing to note is that many of the included companies have failed to meet performance expectations recently. For example, Meituan-Dianping is trading 17% down from its IPO price while Xiaomi has also fallen 40% from its IPO price. These companies will need to have strong earnings announcements in the near future in order to turn their share prices around.

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