MSCI will likely soon include China’s A shares in its global benchmarks, further boosting the profile of Chinese stocks after the FTSE Group decided to include Chinese A shares in a new emerging markets index last month.
MSCI had deferred the inclusion, which did not take place in the group’s normal annual June review, it now says it ‘expects to include China A shares in its global benchmarks after a few important remaining issues related to market accessibility have been resolved.’ MSCI does not identify the issues but says it has formed a working group with the China Securities Regulatory Commission to move toward the inclusion of A shares.
If the issues are addressed soon, MSCI may include the shares in its MSCI Emerging Markets Index outside of the normal review timeline, the firm adds.
‘In our 2015 consultation, we learned that major investors around the world are eager for further liberalization of the China A shares market, especially with regard to the quota allocation process, capital mobility restrictions and beneficial ownership of investments,’ says Remy Briand, MSCI’s managing director and global head of research, in the statement.
On May 26 the FTSE Group announced a decision to launch another emerging markets index, with a weighting of about 5 percent in Chinese A shares, to run alongside its existing emerging markets index. Within a week of the announcement, Vanguard said it would include Chinese A shares in its main emerging markets fund, making it the first major emerging markets fund to do so.
Also in its annual classification review, MSCI says it will hold discussions with international institutional investors about the accessibility of the Saudi Arabian equities market, which opened to foreign institutional investors on June 1. The firm says it may consider adding the market to its annual review list for possible inclusion in the MSCI Emerging Markets Index.
