Index provider MSCI says it won’t add shares traded in Shanghai and Shenzhen to its widely-tracked global benchmarks because of continued concerns over access to China’s markets.
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The MSCI has delayed the inclusion of Chinese A shares into the Emerging Markets Index, despite the Chinese regulator making “significant steps” in addressing global investors’ concerns.
China had made significant steps towards reaching the global standards necessary to be included in MSCI’s index, the US company said. A-shares are yuan-denominated stocks listed in Shanghai and Shenzhen.
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. China’s inclusion would have nearly certainly triggered an inflow of capital, providing at least a short-term boost to share prices.
The MSCI decision comes a year after China’s stock markets went into near-meltdown after a speculative rally burst.
USA index provider MSCI Inc on Tuesday declined to add domestic Chinese stocks to one of its key benchmarks, concluding that Beijing had more work to do in liberalizing capital markets and delivering a blow to Chinese policymakers hoping to broaden the appeal of their currency.
“There have been a lot of significant improvements made recently by the Chinese authorities to improve accessibility for global investors; however, some of them are relatively recent, so we need a little bit of time to assess the effectiveness of these measures”, Briand said. “This is a done deal and investors are not going to wait for a green light from MSCI to invest”, he said. “Hence, MSCI will retain the China A shares inclusion proposal as part of the 2017 Market Classification Review”, MSCI said. Europe is one of China’s biggest export markets. Pre-approval restrictions on launching financial products is also an issue that remains unresolved, MSCI said.
Pakistan stocks hit a record closing high on Wednesday, after the country’s stock market was upgraded overnight and included in the MSCI’s emerging market index.
China’s markets have had a stormy year, with a 40 percent slump in stocks, followed by heavy state intervention and an unprecedented exodus of capital that has put pressure on the Chinese currency. It cited recent changes announced by the Financial Services Commission, including improving currency convertibility, which will not take effect until next year.
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“Any global indexes without China’s “A” shares are incomplete”, Deng Ge, spokesman of the China Securities Regulatory Commission (CSRC), said in a statement released Wednesday. Wall Street indices did, however, recoup the majority of losses in late trading and there was a slightly more resilient tone in Asia.
