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China 'A' shares get MSCI nod, Argentina snubbed

China 'A' shares get MSCI nod, Argentina snubbed”

CHINA'S ARRIVAL: Chinese shares traded in Shanghai, which have always been hard for foreign investors to trade, rose 0.5 percent after index provider MSCI said it will include 222 of what are called "Chinese A-shares" in its widely followed Emerging Markets index. Argentina, it said, would not be upgraded to emerging market status as investors had warned market reforms "needed to remain in place for a longer time period to be deemed irreversible".

The MSCI chose to add China A-shares to its benchmark MSCI Emerging Markets Index, with an initial weightage of 0.73 percent.

"We believe our clients will benefit from today's decision to bring Chinese equities into mainstream investment", said Ryan Stork, BlackRock's chairman for the Asia-Pacific in Hong Kong and one of the company's most senior executives, in an emailed statement.

The Chinese government opened the Chinese mainland market through the Shanghai-Hong Kong Stock Connect in 2014 and the Shenzhen-Hong Kong Stock Connect past year.

Past experience in emerging markets has been that this weighting is lifted over time, says Mr Gao.

"The full China A-share market is very large, very liquid, but still maturing, with retail investors making up about 80% of the daily turnover. Hence we think the market impact would be limited".

During the consultation, the vast majority of institutional investors approved the proposal to include large-cap shares that are not in trading suspension.

The index giant said 222 China A large-cap stocks will be included on a gradual basis beginning in 2018, in the widely used emerging markets index (EMI), which has about $1.5 trillion of assets benchmarked to it.

The policymaker of the state-run financial oversight body said a continuing "great rotation" - referring to investors' shift in focus from developed markets to emerging ones - as well as the influx of offshore investors will outsize the anticipated cash flight.

While it is a small step, global broking houses suggest full inclusion could see up to $US500 billion ($660 billion) worth of foreign capital flow into Chinese equities in coming years.

Despite the fact that efforts by Chinese authorities started as early as 2003 under the so-called "Qualified Foreign Institutional Investors" scheme to attract global institutional investors to invest in the RMB-denominated capital markets, global investors have largely ignored the Chinese onshore stock market, Hirn from East Capital said.

It marks the end of the first stage of a four-year battle by Chinese authorities to gain access to the funds of the biggest global investors who have always been wary of - and prevented from - parking money in A shares. It had left them out because of concerns over restricted access to China's equity markets. Global stock benchmark provider MSCI has made a long-awaited decision to add mainland China-listed sh.

In news that's sure to affect the iShares MSCI Saudi Arabia Capped ETF (NYSE: KSA), MSCI said it's launching a consultation with clients on potentially including Saudi Arabian stocks in the MSCI Emerging Markets Index.

China on Wednesday hailed the acceptance of its stocks in a leading US-based index of emerging market shares as a signal of confidence in the Asian power's economy after three previous rejections.



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