Investors prepare for MSCI part 2, armed with wish list

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The inclusion of Chinese stocks in MSCI's benchmark indexes this year has made mainland equities more attractive to foreign buyers, but exposure to global investment has also revealed some rough edges around corporate China's governance standards.

MSCI adds another tranche of Chinese stocks to its emerging markets index on Monday, which follows the milestone debut inclusion in June, and foreign investors are queuing up to get into the asset class.

MSCI's unofficial estimates indicate the two-stage inclusion will see inflows of roughly 17 billion US dollars into Chinese shares.

But after the second tranche next week, Chinese A shares will still only comprise a tiny 0.8 percent of its emerging market index.

While active fund managers have leeway in allocating funds to China, whose main index is down 17 percent this year, mangers of passive portfolios that track the MSCI indexes will have to include the roughly 230 Chinese companies in the benchmark.

China's securities regulator has said it is working toward giving local stocks greater index weightings and supports a potential China accession into FTSE Russell's global share benchmarks.

Stephane Loiseau, Societe Generale's APAC head of cash equities and global execution services, believes MSCI could triple A-shares' inclusion factor in its EM index to 15 percent over the next six months.

Source(s): Reuters ,Global Times