Share MSCI Inclusion Powers China Stocks To 18-Month High

MSCI made a decision to include mainland Chinese stocks to its Emerging-market indexes next year.

To address those concerns, it's only adding shares available through two cross-border trading links that have opened up since 2014 between Hong Kong's stock market and exchanges in Shanghai and Shenzhen on the mainland.

Editor's note: Global equity indexes provider MSCI has chose to include China's A-share big-cap stocks in its Emerging Markets Index, marking a milestone for the country's opening up.

"Global investors should embrace this structural shift sooner than later, and reap the early-mover benefits in being fully positioned to participate in both onshore and offshore Chinese equities", said Mike Shiao, chief investment officer of Asia ex Japan.

Global equity indexes provider MSCI announced Tuesday that beginning in June 2018, it will include China A-shares in the MSCI Emerging Markets (EM) Index and the MSCI ACWI (All Country World Index) Index.

MSCI said it would add domestic Chinese stocks to its influential emerging markets benchmark after having rejected them for three years running.

The China Securities Regulatory Commission, which has overseen many key reforms in recent years, welcomed MSCI's decision. "In future they may be asked to promote globally to persuade more good companies to remain in the "A" share market, and when conditions are ripe, to attract global companies to list on the "A" share market", he said.

"I think it could take five to 10 years for China to be represented at half its total weight in the global indices". Despite MSCI's move, Mark Makepeace, CEO of MSCI rival FTSE Russell, which compiles the other major emerging market benchmark, told Reuters that many investors continued to have reservations about the China market.

Fang said that the regulator would also look at problems hindering large funds from entering and leaving the market, including possibly reforming the Qualified Foreign Institutional Investor (QFII) programme which allows foreigners to invest in Chinese capital markets.

  • Zachary Reyes