Leading US-based index to include Chinese stocks for 1st time
- Author: Zachary Reyes Jun 22, 2017,
Jun 22, 2017, 3:13
"The A shares inclusion was widely expected from the beginning of this year", he said.
USA index provider MSCI said on Tuesday it will add mainland Chinese stocks to one of its key benchmarks, in a landmark decision for the global investment landscape and the Chinese government.
The 222 A-Shares to be included is an increase relative to MSCI's March 2017 proposal, which included 169 A-Shares.
Seoul shares will shrug off an outflow of few trillion won, analysts said, as the total market capitalization of stocks listed on the benchmark main Korean Composite Stock Price Index (KOSPI) .KS11 reached 1,536 trillion won as of closing on June 20.
It took six years for Korea and nine years for Taiwan to have a full presence in the MSCI Emerging Markets Index.
The decision still gives global investors until May 2018 to begin rebalancing their portfolios, when half of the inclusion factor for A-shares becomes effective, with the transition completing in August 2018. "Inclusion into MSCI EM will put Saudi, and the MENA region, firmly on the radar of global investors". Global stock benchmark provider MSCI has made a long-awaited decision to add mainland China-listed shares to its wid. The stocks that were not eligible to trade under the Stock Connect were removed in the 2017 consultation.
South Africa's rand stabilised too having been spooked by talk of changing the central bank's mandate, Hungary looked set to slosh more cheap money into its banking system, while Russian stocks were on their best run in nearly two months.
Continued progress on trading suspensions.
MSCI attributed its move to both the relatively new Stock Connect, which connects the Shanghai and Shenzhen stock exchanges with Hong Kong, and the loosening by local Chinese bourses of restrictions on index-linked investment vehicles.
MSCI has engaged in an annual review on whether to adopt A-Shares into its global indices since June 2013.
The announcement comes on the heels of a series of market reforms that Tadawul and the Capital Market Authority (CMA) have undertaken as part of Saudi Arabia's Vision 2030 economic transformation program, which in part seeks to bring the Saudi market into alignment with its emerging and developed market peers and gain recognition for the country as an indexed emerging market.
"A" share inclusion and an influx of institutional investors should help promote Beijing's reform agenda over the long term, but investors worry the addition of the new shares, the bulk of which will be in China's troubled financial and industrial sectors, also poses near-term risk.
Declines in Hong Kong contrasted with gains in rival Shanghai, highlighting the changing investment landscape in China as the United States index publisher prepares to add 222 yuan-denominated A shares to its MSCI Emerging Markets Index starting June 2018.
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.
They're some of the biggest companies on China's domestically traded A-share index.
While investment in A-shares has been hard in the past, the government in China has started to make things easier for foreign traders.