SMIC Plunges in Shanghai as Regulator Removes It From Stock Connect Index

Leading Chinese chipmaker Semiconductor Manufacturing International Corp. plunged nearly 6% Friday in Shanghai after the city’s stock exchange operator said it would drop the company from an index of stocks eligible for the Shanghai-Hong Kong Stock Connect program.

Shanghai-based SMIC can’t be traded through the connect program because the company is registered in the Cayman Islands, and Shanghai exchange rules stipulate that only domestically registered companies are eligible. The stock connect program allows investors in Hong Kong and Shanghai to trade stocks on each other’s markets.

The SMIC drop led a decline in China shares Friday. The blue-chip CSI300 index fell 0.6% to 4,945.98, while the Shanghai Composite Index slipped 0.2% to 3,516.30.

SMIC will be removed from the SSE SH Equities Index starting Aug. 16, the Shanghai Stock Exchange said in a statement. The change will make the index consistent with the stocks included in the connect program, the bourse said. A market source said the change won’t have any impact on trading as there is not yet any investment product based on the index.

SMIC’s stock was excluded in trading through the stock connect program when the bourse expanded the program to cover the STAR Market early this year, although its stock was part of the index.

The Shanghai exchange added STAR Market shares to the stock connect program Feb. 1. Only institutional investors are allowed to trade STAR Market shares via the stock connect program. SMIC debuted on the STAR Market in July 2020.

Author: Liu Caiping and Han Wei, Caixin Global

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