MSCI tipped to add China A-shares to EM index

MSCI tipped to add China A-shares to EM index

MSCI is expected to introduce a Chinese A-shares weighting to its Emerging Markets index this week following the latest review of the benchmark.

The provider’s annual assessment is expected to result in an inclusion of the country’s stocks, after a year when China attempted to make its markets more attractive to foreign investors and MSCI appeared to warm to the prospect.

Specialists believe Chinese exposure will make up just a fraction of the index at first, as part of a phased approach to inclusion.

Article continues after advert

MSCI is expected to give A-shares a 0.5 per cent weighting in the first instance, half the originally proposed amount, after the provider opted to revise its inclusion policy. 

The shares would account for more than 10 per cent of the index under its regular classification metrics.

Nicholas Yeo, Aberdeen’s head of Chinese and Hong Kong equities, said: “Mainland China’s entry should be a formality since MSCI eased its own admission criteria. But it will be largely symbolic if it happens.

“The allocation of A-shares in benchmarks will be tiny to begin with, and will rise only slowly. Even then, implementation will take a year, so it will be quite some time before Chinese stocks have a material impact on global equity allocations.”

The introduction of onshore Chinese stocks has been long awaited by some investors. In 2016 MSCI opted to delay their inclusion, citing a desire from investors for further improvements first.