MSCI has held off on including domestic Chinese ‘A’ shares in its benchmark indices due to concerns about “market accessibility”.
The index provider yesterday said China ‘A’ shares were “on track for inclusion” but needs to improve its quota system, the amount overseas investors can put into the market, and address issues around liquidity and share ownership.
MSCI said it was working with the China Securities Regulatory Commission (CSRC) to resolve these problems.
The firm said ‘A’ shares may be included in its indices as soon as all issues have been addressed, even if that occurs outside of its regular annual review.
MSCI has declined to follow the lead of rival index provider FTSE, which decided to include a small number of ‘A’ shares in selected indices last month.
The full addition of China ‘A’ shares, along with Chinese firms listed in the US, would raise the country’s weighting in the MSCI Emerging Markets index above 50 per cent.
But most managers expect a gradual introduction of the shares into the indices rather than a radical overhaul.
Matthew Sutherland, investment director, Fidelity Worldwide Investment, said there could be “some short-term disappointment” at the MSCI announcement from Chinese investors, but he said it was “not a surprising decision and we don’t feel it will be a major market-moving event”.
Meanwhile, MSCI announced it would review whether Pakistan should be promoted to the Emerging Markets index in 2016 and said it would consult on whether Saudi Arabian shares should be included as well.
