In a nutshell, all financial products linked to an index containing mainland shares need to be pre-approved by a local Chinese stock exchange even if the product was listed internationally.
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Pakistani stocks hit a record high Wednesday after USA index firm MSCI upgraded the country to “emerging market” status on its influential global equities index for the first time since 2008. “I had pretty high expectations because the direction in terms of how the Chinese government has addressed concerns raised by MSCI was very positive”.
Still, recent changes that China has made over market regulation are “significant steps toward the eventual inclusion”, said Remy Briand, managing director at MSCI.
In its annual market classification review, MSCI welcomed market reforms announced by Saudi authorities last month but merely said that once implemented by mid-2017, they would “bring the Saudi equity market closer to Emerging Market accessibility standards”.
In addition, people make a bigger deal out of MSCI than necessary.
Global indexer MSCI chose to delay adding mainland China’s stocks to its benchmark indexes one more time.
Chinese authorities have been making efforts to liberalize their financial markets.
The Shanghai Composite Index added 0.32 percent to 2,842.19 points. Traders are allowed to trade up to 2 per cent either side of the reference point for the day. The free float has diminished greatly and what role does the Chinese Communist Party have in stock markets?
But Beijing reacted coolly to MSCI’s decision released Tuesday, claiming that its “A” shares were anyway becoming “more influential” in the world.
“There will be some disappointment over the MSCI decision at a time when China’s economic fundamentals are not conducive to rallies in share prices”, Shingo Ito, senior economist at Mizuho Research Institute. The organization again said it would continue working with Chinese regulators, and consider approving China for inclusion outside of its scheduled annual review, if appropriate. The iShares MSCI China A ETF (CNYA) tracks an index that covers China A-shares securities that are listed on the Shenzhen and Shanghai exchanges. While investment quotas for foreign institutions “have been increasing over the past few years, China’s equity market is very domestic”. Investors also face a limit on the amount of money they can repatriate each month.
Investors recognized the actions taken to further open the China A-shares market and highlighted that the topic of beneficial ownership has been satisfactorily resolved, said the MSCI statement.
It was a blow to China’s efforts to join Global markets, and ended for now the prospect of money from funds passively tracking MSCI benchmarks to come into the mainland soon. Here’s how China’s stock market stacks up now.
The Shanghai gauge traded at 2,887.21, while the CSI 300 Index added 1.3%.
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Vanguard Group past year added A-shares to its broad emerging markets exchange-traded fund, Vanguard FTSE Emerging Markets ETF, which tracks a different index.
