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Shares of a Chinese AI chipmaker experienced a sharp decline after doubling last month, following an announcement that the Star 50 Index would undergo a regular rebalancing. The company’s stock dropped 14.4% to 1,202 yuan (around $168.42 USD) yesterday, marking a decline of over 24% since hitting a record closing price of 1,587.91 yuan ($222 USD) on August 29, when it surpassed a leading multi-year stock to become the most expensive on the mainland. However, the stock rebounded 6.6% today.
The Shanghai Stock Exchange and the China Securities Index Company confirmed that the Star 50 Index will conduct its quarterly rebalancing after the market closes on September 12. Following recent gains, the company’s weight in the index surged to 14.9% by the end of trading on September 3. Regulations, however, limit a single stock’s weight to no more than 10%, with the combined weight of the top five stocks capped at 40%.
Given that the company’s share weighs approximately 15%, and another major player, Semiconductor Manufacturing International Corporation, accounts for 10.2%, both are expected to be adjusted downward in the upcoming rebalancing. This rebalancing will likely be reflected in various Star 50 ETFs, potentially influencing the stock prices of both companies.
Data shows that as of September 3, funds tracking the Star 50 Index managed a total of 184.5 billion yuan (roughly $25.8 billion USD). Based on the company’s 14.9% index weight and the 10% cap per stock, these funds would need to sell off shares worth over 9 billion yuan ($1.3 billion USD).
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