The MSCI emerging index already includes some Chinese H shares listed in Hong Kong.
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Chinese authorities have introduced a spate of reforms in an attempt to win their domestic market a place on the index. In the long run, this would gradually bring more global institutional investors into the A-share market and help it to achieve a better pricing mechanism.
Regarding those measures, he added, “They demonstrate a clear commitment by the Chinese authorities to bring the accessibility of the China A shares market closer to worldwide standards”.
The pie chart above shows the country-level exposure of the MSCI Emerging Markets Index as of May 2016.
Last November, foreign investors sold off Korean shares to the tune of 538.2 billion won ($458.5 million) when the MSCI included the first batch of Chinese American depositary receipts in the emerging market index.
“This is a very big problem for investors, and the removal of these requirements is necessary for inclusion”, Briand said.
Stocks in the US and globally were mostly lower for a fourth day Thursday as jittery investors awaited the Federal Reserve’s decision on interest rates and anxious about Britain’s vote on whether to leave the European Union.
But Guillaume Derville, head of Asia equity and derivative strategy at BNP Paribas, believes MSCI would eventually accept having A-shares join its index in the future.
Global stock benchmark provider MSCI says it is delaying including stocks listed in mainland China in its widely followed Emerging Markets Index, saying investors want China to take further steps toward making its market more accessible.
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.
The key Shanghai index opened 1 percent lower after the MSCI announcement, but the index rebounded in the morning trade, rising 1 percent as of 11 a.m. Inclusion by MSCI could have fueled demand for Chinese companies.
Here is a snippet from the MSCI’s press release explaining the decision to exclude A-shares into its emerging markets index on this occasion.
MSCI, originally known as Morgan Stanley Capital International, provides a range of global stock indexes that professional investors track to measure their performance.
“As a result of these concerns, MSCI will retain the China A shares inclusion proposal as part of our 2017 Market Classification Review. The negative impact to the Hong Kong stock market would not be high”, the BOCHK report said. But it requires them to do so in batches with a limit capping the amount of capital that could be repatriated at 20 percent of their investment in the mainland market each month.
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.
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Deng Ge, spokesman for China’s stock market regulator China Securities Regulatory Commission (CSRC), said in a statement in Chinese on CSRC’s website that the decision will not affect the reform and opening-up process of China’s capital markets.
