MSCI indices to include 234 China-listed companies
May 22, 2018 Category China News Round-up, Weekly
China’s stock market is expected to see a new inflow of global investment after the world’s top index provider MSCI announced the final list of Chinese shares to be included in its benchmark equity indices. Some 234 domestically listed Chinese companies, ranging from China’s biggest liquor maker Kweichow Moutai to Industrial and Commercial Bank of China (ICBC), will be added to MSCI indices on June 1. The inclusion of China’s A shares, yuan-denominated equities traded on mainland China stock exchanges, in the MSCI indices will give foreign investors greater exposure to the Chinese stock market and also marks the further integration of China’s capital market into the global financial system.
MSCI said that the inclusion will be a two-step process with the initial inclusion of 234 Chinese A shares, making them represent around 0.39% of the weighting on the MSCI Emerging Markets Index. The second step will take place in September when the list of Chinese shares to be added to the MSCI will be further expanded, likely bringing the representation of A shares to around 0.8%. The inclusion of A shares means that foreign investors such as exchange-traded funds (ETFs), pension and endowment funds will need to allocate the added Chinese stocks if they want to closely track the MSCI benchmark gauges.
UBS Securities estimated that the inclusion could lead to USD18.4 billion of fund inflows into the A-share market. “Consumer discretionary, consumer staples and healthcare are likely to benefit more from foreign inflows, as we find that foreign investors have persistently favored these sectors,” said Gao Ting, head of China Strategy at UBS Securities, the China Daily reports.
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