CICC expects $15 to $20 bln capital inflow in 2018

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Chinese A-share stocks continue to rise on Monday after global equity index provider Morgan Stanley's Capital Index (MSCI) announced MSCI's China A Inclusion Indexes. This transitional index went online Monday midnight.

Initially, the constituents of the MSCI China A Inclusion Indexes will be derived from the MSCI China A International Large Cap Provisional Index. It renamed the current "MSCI China A Indexes" to "MSCI China A Onshore Indexes" and launched new indexes covering only stocks accessible through Stock Connect, which would be named "MSCI China A Indexes" on March 1, 2018

The MSCI China A Inclusion Indexes is designed to prepare for the official inclusion of A shares in the MSCI Emerging Market Index in 2018.

MSCI said in June that it would include 222 large Shanghai and Shenzhen listed companies into its widely followed Emerging Market Index.

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Meanwhile, Chinese investment bank China International Capital Corporation (CICC) said that the MSCI coverage of A-shares means 15 to 20 billion US dollars of capital inflows to China in 2018 alone. Others, however, warn of the potential wider exposure for global investors to China's old economy stocks.

The official inclusion will happen next June in MSCI's Emerging Market Index, kicking off a new trading mechanism for global investors eyeing China exposure. Before the MSCI move, China has been running the Qualified Foreign Institutional Investors (QFII) program for global investors in China. The MSCI coverage could allow Chinese mainland shares to reach a wider group of investors around the world.

Although the process won't happen overnight, but CICC believes that both capital inflows and outflow of China will continue to expand.