The US index provider, MSCI, took the historic step of adding some mainland-listed shares to its global benchmarks.
The new coverage includes Chinese banks, manufacturers, and raw-materials firms. Analysts said the move would expose foreign investors to sectors challenged by high debt and low growth.
But Hong Hao, strategist at Bocom International, said the scaled-down inclusion from 448 stocks in March, means less a smaller index weight of only 0.7% initially, bringing no more than 10 billion US dollars to the Chinese mainland, less than the daily trade volume in a market that’s eight trillion US dollars in size. Hong said the lift on sentiment in the near term will be much more significant than the actual capital inflow boost.
Amir Hoosain, principal consultant at Boundary Advisors, expects to see an initial bias towards index-based investing on A-shares. US index provider MSCI said on June 20 it would add 222 Chinese yuan-denominated A-shares to its family of emerging market indices, which is tracked by funds managing more than 1.5 trillion US dollars.