Date
16 December 2017
Investors believe the inclusion of A shares in MSCI's Emerging Markets Index will lead of billions of dollars flowing into the mainland markets. Photo: Reuters
Investors believe the inclusion of A shares in MSCI's Emerging Markets Index will lead of billions of dollars flowing into the mainland markets. Photo: Reuters

MSCI to be flexible on review schedule for A-share inclusion

Stock index provider MSCI said it will be flexible on its schedule for the review of whether to include China’s A shares in its key emerging markets benchmark index.

MSCI’s review on if and when to include mainland shares in the Emerging Markets Index, which is tracked by US$1.7 trillion of funds, is being closely watched by investors since it may lead to billions of dollars flowing into China’s markets, Reuters said.

Rival index provider FTSE Russell said last week it will launch two transitional indexes that include the A shares – a staggered approach that will bring the shares into its emerging markets benchmark in two to three years.

MSCI officially has a June-to-June schedule for its market classification review and Beijing has been lobbying hard for mainland-listed stocks to be included in its emerging market benchmark this year.

Expectations that they could make the cut have grown after the Shanghai-Hong Kong Stock Connect scheme helped open up China’s stock market.

But some leading global fund managers feel China must make bolder reforms before mainland-listed shares can be included in key indexes, the report said.

The Stock Connect scheme is not due to add Shenzhen shares, which represent a large chunk of China’s equity market, until later this year, leading to speculation MSCI may review the inclusion of A shares again in the autumn if it decides not to push ahead this month.

Speaking during a press briefing in Hong Kong on Monday, Chia Chin Ping, MSCI’s head of research for Asia Pacific, said the Stock Connect, as it currently stands, “cannot completely fulfill the needs for benchmark inclusion as a standalone channel”.

But he said the index provider would be as flexible as possible on the review schedule, adding it was not rigidly bound to the year-to-year cycle.

He did not give any indication of MSCI’s decision on a formal announcement expected on June 9.

MSCI began consulting with the market about the potential inclusion of A shares in March 2014 but opted not to include them in its June review last year.

Chia said MSCI’s 2014 proposal stands unchanged, and that the index provider was considering an initial weighting of 5 percent for A shares when they are first included in its Emerging Markets index.

– Contact us at [email protected]

CG

EJI Weekly Newsletter

Please click here to unsubscribe