BlackRock says ETFs match index cuts of China stocks

[January 12, 2021]  By Ross Kerber

BOSTON (Reuters) - Top asset manager BlackRock Inc said its iShares ETFs have complied with index provider moves to drop certain China securities in response to pressure from Washington.

In a note to clients provided by a spokesman for the New York asset manager on Monday, BlackRock listed five ETFs affected by the index provider changes, including four funds based on indexes provided by MSCI Inc and one benchmarked against the FTSE Russell China 50 Index.

The move is the latest as Wall Street firms cut their exposure to China, and shows the influence of index providers whose products determine the flow of passive investments.

Since last month MSCI, FTSE Russell and S&P Dow Jones have said they will remove a total of 15 different companies from equity indexes, among those that the U.S. Defense Department has said have links to the Chinese military. Many of the companies have denied the assertions, and China's government has said the claims lack evidence.

BlackRock has declined to make executives available for interviews. In its note to clients BlackRock said, "iShares ETFs have adjusted and will continue to be responsive in accordance with their respective indexes’ treatment of securities impacted by recent U.S. sanctions on certain Chinese companies."

An MSCI-based fund listed by BlackRock is the $6.8 billion iShares MSCI China ETF. As of Jan. 8, its top holdings were Alibaba Group and Tencent Holdings Ltd, according to BlackRock's website.

Sanctioned firms like China Mobile Ltd, and Hangzhou Hikvision, among the ETF's investments in 2020, are not currently listed.

(Reporting by Ross Kerber in Boston; Editing by Cynthia Osterman)

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