A woman walks past a Midea air conditioner store in Yichang, Central China's Hubei Province. Photo: IC

Consumer giant Midea will be removed from the MSCI global standard index series after the Hong Kong Stock Exchange (HKEX) suspended shares in the Chinese company through the stock connect mechanism.Industry analyst interpreted the decision as preventing a foreign takeover of the firm.Midea reached 28 percent foreign ownership on Monday, and is due to be removed from the MSCI global standard index series on Friday, after the HKEX suspended buying orders via the stock connect mechanism, according to the MSCI.As notified by the Shenzhen Stock Exchange, the aggregate foreign shareholdings of Midea Group have gone beyond 28 percent, according to a statement from the HKEX on Wednesday. Pursuant to the rules of the exchange, buying shares in Midea through the Shenzhen-Hong Kong Stock Connect are suspended effective Wednesday, while selling is still accepted, the report said.Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times on Wednesday that the main reason the MSCI has removed it from the basket is because shares in the firm have lost liquidity after the foreign investor's portion reached the limit of 28 percent set by domestic stock exchanges."The suspension by the domestic stock exchanges is a necessary approach to reduce the possible risks of mergers and acquisitions from foreign investors," Dong said."Midea, one of the most successful companies in China, has always been a stock with higher investment value, but the Chinese capital market is not mature enough to fully open to overseas investors," Dong said. "Also, major shareholders in companies such as Midea may lack experience in preventing mergers and acquisitions by international investors."In 2014, before the Shanghai-Hong Kong Stock Connect was launched, the China Securities Regulatory Commission issued several regulations regarding the stock connect mechanism in the Shanghai and Hong Kong stock markets, which stipulated that all foreign investors should hold no more than 30 percent of the total shares of a single listed A share company.When foreign investors hold more than 28 percent, they are suspended until their total stake falls below 26 percent. At the same time, if more than 30 percent, investors will be forced to start the selling process, according to the regulations.Following Monday's suspension, investor holdings in Chinese firm Midea's QFII, RQFII and Shenzhen-Hong Kong Stock Connect fell to 27.87 percent on Tuesday.Hong Shibin, executive director of the marketing committee of the China Household Electrical Appliances Association, told the Global Times on Wednesday that the increase of foreign capital in its stocks is a good sign, as it means foreign investors have positive expectations for Midea's business worldwide.Fan Wei, a research fellow with the Securities Association of China, told the Global Times that it is not a secret that foreign investors love blue chip stocks.According to a company report, Midea Group's operating revenue reached 220.9 billion yuan ($31.8 billion) in the first three quarters of 2019, up 7.37 percent year-on-year. Net profit was 21.3 billion yuan, up 19.08 percent year-on-year."The growth rate is considerable, and foreign investors attach great importance to the financial quality of the company," Fan said.Midea responded that reaching 28 percent foreign ownership is a normal market transaction. The company said that the exclusion by the MCSI is a rule, but it indicates that foreign investors are optimistic about the value of the company's investment, Jiemian.com reported on Wednesday."Midea's case is not the only one. I'm sure there will be more companies like Midea drawing greater attention from foreign investors," Hong said. "Meanwhile, as the Chinese capital market matures, there will be broader opportunities for foreign investors."