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Inclusion of A-shares in MSCI indices to boost China stocks over longer term

Zavier Ong & Ko Ding Wei
Zavier Ong & Ko Ding Wei7/3/2017 08:00 AM GMT+08  • 7 min read
Inclusion of A-shares in MSCI indices to boost China stocks over longer term
SINGAPORE (July 3): After three years of consultations, index operator MSCI announced on June 20 that it would be adding 222 A-shares to the MSCI Emerging Markets Index and several other indices. Prominent names on MSCI’s list include financial behemoth
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SINGAPORE (July 3): After three years of consultations, index operator MSCI announced on June 20 that it would be adding 222 A-shares to the MSCI Emerging Markets Index and several other indices. Prominent names on MSCI’s list include financial behemoths such as Bank of China, China Merchants Bank Co and Ping An Insurance Group Co of China, as well as Tsingtao Brewery Co and Hai nan Airlines Holding Co.

Bank of America Merrill Lynch analyst David Cui expects the MSCI decision to bring some US$3 billion ($4.1 billion) of passive inflows and US$18 billion of active inflows into the A-share market, as funds alter their portfolios to factor in changes in benchmark weightings. Should investors be buying into these stocks? What are the best ways to play this China story?

For years, investors who wanted to bet on the fast-growing Chinese econo my were limited to H-shares listed on the Hong Kong Stock Exchange or through American Depositary Receipts (ADRs). Access to the A-share market, that is, renminbi-denominated stocks listed in Shanghai or Shenzhen, was limited to qualified foreign institutional investors. The QFII programme allows institutional investors who meet certain requirements to invest in a limited scope of cross-border securities products.

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