China Gains Global Market Approval by MSCI Inclusion

After Three Years, A-Shares Win MSCI Inclusion

(By Feng Jianmin. Shanghai Daily, June 22, 2017, p. A9. Complete text:) Global institutional benchmark provider MSCI yesterday decided to include 222 of China’s RMB-denominated A-shares in two of its indexes.

The move follows three years of rejections.

Market watchers say the decision is symbolic of the opening-up of China’s capital market, but the short-term impact would be slight as limited funds expected to flow into the domestic market.

From June next year, the shares will be included in MSCI’s Emerging Markets Index and All Country World Index. The shares, mainly large caps traded under stock connect programs with Hong Kong, took a weight of 0.73% in the EM index, to which over $1.5 trillion in assets is benchmarked.

MSCI said the decision resulted from greater accessibility to China’s RMB-denominated A-share market under stock connect programs and easier processes to set up index-linked investment vehicles under the loosening of pre-approval requirements.

The inclusion received "broad support from international institutional investors" the company had consulted, MSCI said.

Since last year’s MSCI rejection, Chinese financial regulators have added the Shenzhen-Hong Kong Stock Connect program to the existing Shanghai-Hong Kong link.

The China Securities Regulatory Commission also acts against arbitrary trading suspensions to enhance market liquidity.

MSCI said the pool of included A-shares may expand if China further improves market liquidity and facilitates cross-border capital flow.

The CSRC lauded MSCI for its decision while pledging deeper market reform.

"The MSCI inclusion responds to the needs of international investors and shows investors’ confidence in the Chinese economy and financial market. We always welcome this," said CSRC spokesman Zhang Xiaojun.

"The MSCI inclusion is both a challenge and an opportunity for China’s capital market. We will continue the reform to make it more ...

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