Global equity index provider MSCI announced on Tuesday it will include China A-shares in the MSCI Emerging Markets (EM) Index and the MSCI ACWI (All Country World Index) Index beginning June 2018. 

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.

"This decision has broad support from international institutional investors" with whom the company consulted, MSCI said. The decision, MSCI said, was 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.

"International investors have embraced the positive changes in the accessibility of the China A shares market over the last few years and now all conditions are set for MSCI to proceed with the first step of the inclusion," said Remy Briand, MSCI managing director and chair of the MSCI Index Policy Committee. "The expansion of Stock Connect has been a game changer for the market opening of China A shares."

A two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect after the decision. The first inclusion step will coincide with the MSCI's May 2018 Semi-Annual Index Review followed by the second step which will take place as part of the August 2018 Quarterly Index review. 

(With inputs from Xinhua and Reuters)