Flagship Index provider MSCI has unveiled a list of 234 Chinese mainland-listed stocks to be included to its flagship emerging markets index, an admittance that illustrates a key development in the opening of the country’s markets to foreign investors. After months of tweaks, MSCI on Tuesday published the final list of Chinese companies for admittance in the index at the end of May. The index a benchmark for some $1.6tn of assets globally.
The stocks to be added span sectors ranging from banking, such as Industrial and Commercial Bank of China and Bank of China, to real estate, including developer China Vanke, and consumer brands such as Qingdao Haier. Although the initial number of stocks is just a slice of China’s 3,000 renminbi-denominated A-shares, analysts expect it to rise as the country’s markets become increasingly accessible with fewer capital controls.
MSCI inclusion will mean that investors in passive funds, such as index trackers and exchange-traded funds, will be obliged to hold these A-shares. With, the inclusion of the 234 stocks to be done over two stages, at the end of May and end of August. MSCI had proposed adding A-shares to the Emerging Markets index three times since 2013 but was rebuffed by stakeholders — primarily large asset managers — concerned about their ability to move money more freely in and out of the country.
The turning point came with the growth of the stock connect programme, which was established in 2014 but has broadened rapidly over the past few years. The dual trading links between Hong Kong and the Shanghai and Shenzhen markets enable foreign investors to access the China A-share market through their accounts in Hong Kong. MSCI said the reason for the two-stage inclusion process was the fact that there are daily limits on the amounts that can be traded through the stock connects.
The stock connect trading limits were increased last month, with the amount of money that can be channelled from Hong Kong into A-shares quadrupling.
By Scherzando Karasu, External Financial Journalist
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