MSCI to include Mainland Chinese stocks to its emerging-market indexes in 2018

MSCI decided to include mainland Chinese stocks to its Emerging-market indexes next year. The change took place following several years of monitoring closely China’s reforms in the stock markets. In the earlier years, one of the main arguments to keep the Mainland stocks outside the MSCI indexes has been tight regulation on repatriation of foreign funds that restricts investors’ behaviour.

Moreover, there have been worries about constant interference by China’s authorities that is shown in a high number of trade suspensions. According to the wide consultation of international investors, some of those obstacles have been removed. The access of foreign investors, in particular, has improved.

The inclusion of Chinese A shares to the MSCI indexes does not signify that the challenges faced in China’s markets would have overcome, stated Nordea Bank. The decision could be rather considered as a compromise as the weight of 222 China A Large Cap stocks in the MSCI Emerging Markets Index would be just 0.73 percent, much smaller than the market capitalisation in China would suggest. MSCI stated that China’s weight in the index would rise along further reforms.

“The inclusion of Mainland Chinese stocks to the MSCI EME indexes is likely to increase foreign investors’ interest into the Chinese markets”, said Nordea Bank.

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