Analysts have predicted that inclusion would tie $1.5 trillion in passive capital, which tracks the emerging market index, to the fortunes of China’s A-shares.
Advertisement
United States index provider MSCI Inc. said on Tuesday it would hold off on adding China-listed stocks to one of its key benchmarks, a major disappointment for Chinese policy makers who had sought to satisfy MSCI’s calls for improved access to its capital markets.
He said investors also needed more time to assess if new share suspension rules would be effective in preventing a repeat of last summer, when more than half of China’s listed companies halted trading in their stocks to sit out the crash.
Beneficial ownership: This issue has been resolved, according to MSCI, as most worldwide institutional investors are happy with the clarification released by China’s securities market regulator in May 2016.
With offshore investors flagging capital repatriation limit as their top concern, Nomura Securities said: “The removal of the limit may increase the pressure of capital outflows during onshore market downturns, and this is a valid concern of Chinese authorities”.
The pie chart above shows the country-level exposure of the MSCI Emerging Markets Index as of May 2016.
Mumbai: In a major relief to emerging market equities including India, Morgan Stanley Capital Index (MSCI) has decided against including China A shares in its global indices.
The benchmark Shanghai Composite Index was up 0.25 percent in early morning trading and the Shenzhen Composite Index gained 1.35 percent.
Remy Briand, MSCI managing director and global head of research said: “There have been significant steps toward the eventual inclusion of China A shares in the MSCI Emerging Markets Index”.
They had opened roughly 1 percent lower, as some investors who had clung on to hopes of MSCI inclusion unwound their bets.
But Beijing appeared to be unfazed by the MSCI decision, claiming that the “A” shares were anyway becoming “more influential” in the world.
However, it warned that full inclusion of China A-shares into MSCI’s indices was still subject to the abolishment of China’s quota system, liberalisation of capital mobility restrictions, and alignment of worldwide accessibility standards. Last year, the USA analytics firm said that further liberalization was needed before acceptance.
“Finally, the local exchanges pre-approval restrictions on launching financial products remain unaddressed”.
“So if we see further developments in terms of regulation, in terms of how we access the market as investors from a foreigner perspective, then indeed we could see inclusion”, she said.
Advertisement
Nigeria will be removed from the MSCI frontier markets index and reclassified as a stand-alone market, the group announced, and South Korea will not be included on the list for reclassification to developed market status.
