The openness of China’s stock markets is the most important factor that will determine the inclusion of A shares in the MSCI indexes, according to a senior official of the equity index provider.
Chia Chin-ping, Hong Kong-based managing director and head of research for Asia Pacific at MSCI Inc., said even if mainland-listed A shares are not included in the company’s emerging markets index soon, they still could be added later on condition that there is material progress in the opening of China’s stock markets, the Hong Kong Economic Journal reported.
There is flexibility in the timing of adding A shares to MSCI indexes, given the massiveness of the markets, Chia added.
Currently, overseas investors can only trade in the A-share market through the Qualified Foreign Institutional Investor (QFII) scheme or through the Shanghai-Hong Kong Stock Connect.
China is also considering a trading link between the Shenzhen and Hong Kong stock markets, which Chia said will further change the mainland market landscape in two months’ time.
However, Chia believes it is the Renminbi-denominated Qualified Foreign Institutional Investor (RQFII) scheme that will be most effective for foreign investors in structuring fund products.
Market observers have been speculating that A shares will soon be added to the MSCI emerging markets index with an initial weighting of 5 percent of the total capitalization of the A-share market.
It is estimated that US$140 billion to US$170 billion of funds would flow into A shares should they account for 10 percent of the composition of the MSCI emerging markets index in value.
Translation by Vey Wong
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