Russell Announces Preliminary Index Changes

U.S.-listed China small caps are heavily affected by the preliminary changes that were announced last night for the Russell 2000 and Russell Global indexes. From the 29 China stocks that are currently members of the Russell 2000 Index only one will survive this year's reconstitution. Russell has apparently decided to implement a strict interpretation of the new "Home Country Indicators" and basically all the assumptions I've made in a previous article on the subject have been proven correct now.

The sole survivor of the current China group in the Russell 2000 Index is Advanced Battery Technology (ABAT), but it will be joined after the market closes on June 25 by three new additions: Aoxing Pharmaceutical (AXN), CDC Corporation (CHINA) and L & L Energy (LLEN). I believe a fourth stock, China North East Petroleum (NEP), would have been eligible but it has disqualified itself by getting suspended from trading so the stock couldn't be ranked on the May 28 deadline.

I would expect LLEN and also AXN to benefit from the Russell addition and several of the smaller capitalized deletions to show weakness into the June 25 reconstitution date. Please note that several of the larger cap deletions, stocks like CSFG, SOHU or HOGS will not be deleted from the Russell Indexes completely, instead they will stay on the Russell Global ex-U.S. Index. Those names are not included in the lists that follow as Russell did not announce them explicitly. Others like CHLN, CBAK or HQS will be dropped entirely as the market cap threshold for the Global Index is much higher than for the Russell 2000.

Here is the full list of China Small Caps affected by last night's announcement.

Added to the Russell 2000 Index

AXN   Aoxing Pharmaceutical
CHINA   CDC Corporation
LLEN   L & L Energy

Reconfirmed for the Russell 2000 Index

ABAT   Advanced Battery Technology

Deleted from Russell 2000 Index

ADY   American Dairy
AOB   American Oriental Bioengineering
ASIA   Asiainfo Holdings
CAAS   China Automotive Systems
CAST   ChinaCast Education
CBAK   China BAK Battery
CFSG   China Fire & Security
CGA   China Green Agriculture
CHBT   China-Biotics
CHLN   China Housing & Land Dev
COGO   Cogo Group
CPBY   China Information Security
CPSL   China Precision Steel
CSKI   China Sky One Medical
CSR   China Security & Surveillance
CTFO   China TransInfo Technology
DYP   Duoyuan Printing
FEED   Agfeed Industries
FSIN   Fushi Copperweld
FUQI   Fuqi International
GSI   General Steel Holdings
HEAT   Smartheat
HOGS   Zhongpin
HQS   HQ Sustainable Maritime
HRBN   Harbin Electric
LIWA   Lihua International
NIV   NIVS IntelliMedia Technology
SDTH   ShengdaTech
SOHU   Sohu.com
SUTR   Sutor Technology
UTA   Universal Travel Group
WATG   Wonder Auto Technology

Added to the Russell Global Index

AUTC   AutoChina International
CAGC   China Agritech
CBEH   China Integrated Energy
CBPO   China Biologic Products
CCME   China MediaExpress
CHOP   China Gerui Advanced Materials
CO   China Cord Blood
CTEL   City Telecom (H.K.)
CVVT   China Valves Technology
CXDC   China XD Plastics
DEER   Deer Consumer Products
GFRE   Gulf Resources
HTHT   China Lodging Group
JKS   JinkoSolar
RINO   RINO International
SCOK   SinoCoking Coal
SORL   SORL Auto Parts
YONG   Yongye International

Deleted from the Russell Global Index

CHNR   China Natural Resources
CSUN   China Sunergy
DL   China Distance Education
GIGM   GigaMedia Limited
GRO   Agria
GU   Gushan Environmental Energy
JRJC   China Finance Online
NED   Noah Education Holdings
NCTY   The9 Limited
QXM   Qiao Xing Mobile Communication