Markets

China admitted to MSCI emerging markets Index

China admitted to MSCI emerging markets Index

Inclusion in the index is seen as significant for China's stock markets because many overseas investors measure the performance of their portfolios against MSCI indexes and are obliged to buy shares in them.

This decision has broad support from Global institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market of both the Stock Connect program and the loosening by the local Chinese stock exchanges of pre-approval requirements that can restrict the creation of index-linked investment vehicles globally.

MSCI plans to add 222 China A Large Cap stocks, representing on a pro forma basis approximately 0.73 percent of the weight of the MSCI Emerging Markets Index at a 5-percent partial Inclusion Factor, according to its 2017 market classification review released Tuesday. A two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect.

Previously, MSCI had delayed the inclusion of the Chinese stocks because of certain investment restrictions.

Nigeria's shares will remain in the frontier index until at least November, when MSCI will again address the country's access to markets.

"From the investment community there has been overwhelming positive feedback on the development [of A-share markets] by the Chinese regulators over the years", Sebastien Lieblich, global head of index management research, said in a media briefing. Accordingly, they will be better able to satisfy investor demand for broad-based index exposure to China's economy and also enable investors to build additional strategies using the domestic Chinese market.

The new stocks will make up roughly 0.73% of the MSCI Emerging Markets index and will be added in two tranches in May and August 2018. MSCI now serves 97 out of the top 100 asset managers, according to its official statistics.




Overnight, U.S. stocks closed lower on Tuesday, easing from record highs as a slump in energy weighed on the broader market while investors mulled over comments from Washington suggesting that stronger economic growth relied on overhauling the tax system. The proposal to include Large Cap shares that are not in trading suspension was approved by the vast majority of institutional investors.

The Saudi Stock Exchange (Tadawul) is pleased to announce today that it has been named by MSCI to the organization's Emerging Market Index Watch List. Saudi Arabia's full inclusion in the widely followed MSCI Emerging Markets Index wouldn't take place for another year.

"The inclusion is both an opportunity and a challenge for China's capital market reform".

"This decision has broad support from global institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market", MSCI said in a statement.

While the big news centered around the index provider's decision to finally promote China A-shares to the MSCI Emerging Markets Index, MSCI revealed some other noteworthy tidbits. MSCI will continue to monitor the situation and launch a public consultation to solicit feedback from investors once warranted.

With stock market investments having become something of a national hobby, shares in Chinese-listed companies are often suspended to halt sharp losses and protect these investors. "Global investors are expected to monitor the China markets more closely from now on", Ma said. MSCI wants the market to open up more.

Investors can already access Chinese domestic companies via listings on exchanges in Hong Kong, Singapore, the United States, and the UK.


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