Chinese Investors are awaiting the final decision by MSCI about whether China A-shares will be included in the MSCI Emerging Markets Index.
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Investors from the Americas to Asia have been fleeing for the exit over the past week as a succession of opinion polls put Britain’s “Leave” camp in front as the June 23 vote approaches. But the mood was less dire than that seen on Monday, with share losses generally moderate across the region.
Emerging markets rallied in the past three weeks as the weakest U.S.jobs data in nearly six years prompted futures traders to rule out a Federal Reserve interest-rate increase at its June 14-15 meeting.
“It’s the calm before the storm”, said Alex Wijaya, senior sales trader at CMC Markets in Singapore. Around 1.5 million Eastern Europeans, especially Poles, live in Britain and the region has the most direct economic links not only straight to the United Kingdom but also via the eurozone, which could be hit hard by a Brexit.
The regional equity benchmark fell a fifth day, extending its longest decline in a month, with polls indicated mounting support for the United Kingdom leaving the bloc contributing to a loss of more than US$2 trillion in global equity value since last Thursday. United Bank Limited (UBL) inflated 1.83%, Lucky Cement Limited (LUCK) appreciated 3.61%, Fauji Fertilizer Company Limited (FFBL) was up 0.31%, Engro Corporation Limited (ENGRO) increased 1.14%, Hub Power Company (HUBC) inched up 2.51% and Pakistan State Oil (PSO) accumulated 1.99%.
Global indexer MSCI chose to delay adding mainland China’s stocks to its benchmark indexes one more time.
MSCI, which reviews its indexes twice a year, also delayed the inclusion of China’s “A-shares” last summer. The mainland Chinese stocks have had high volatility since then, including stock suspensions last summer and a circuit breaker fiasco in January. The index and one tracking Chinese shares traded in Hong Kong took the two top rankings among 93 global measures tracked by Bloomberg over the span.
The flow of additional funds into Chinese stocks “has abated due to reduced hopes for MSCI’s A-share inclusion”, said Zhu Bin, an analyst at Southwest Securities.
Official comment from China was terse. “Basically people are looking for alternatives, finding markets that are less correlated to the US interest-rate cycle and the China macro slowdown”. Investors typically scramble for yen, seen as a safe-haven asset, during times of market turmoil.
The yen strengthened 0.8% against the greenback, and yields on Japanese, South Korean and Taiwanese bond yields tumbled to all-time lows.
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The dollar bought 105.74 yen, down from 106.19 yen in NY, while the euro was at 119.35 yen, having fallen to a more than three-year low of 119 yen Monday.
