Over 200 Chinese A-shares officially included into MSCI

World
Europe

More than 200 Chinese A-shares have officially been included in the MSCI’s Emerging Market Index starting Friday, a significant step that further opens China’s equity market to more global investment.

This means that traders looking to track the gauges run by MSCI, the world’s biggest stock index compiler, need to buy yuan-denominated stocks for the first time.

Analysts had predicted inflows of about 10 billion US dollars around the inclusion, which should be a great boost to the Chinese stock market.

However, Chinese stocks closed lower Friday, with the benchmark Shanghai Composite Index down 0.66 percent. The Shenzhen Component Index fell 1.23 percent, and ChiNext lost 1.96 percent.

One major reason could be investors’ fear of a global trade war reignited by US metal tariffs imposed on its allies EU, Canada and Mexico.

Another factor is that active funds have been gradually raising their investment in Chinese shares over the past two months via connect schemes that link Hong Kong's exchange with the mainland's.

Especially on Thursday, the last trading day before the MSCI inclusion, there has been a net influx of about 1 billion US dollars in funds from offshore as passive funds tracking MSCI's index shifted money into China to rebalance their holdings.

Although Friday’s trading didn’t meet expectation, foreign investment organizations are reportedly getting ready to embrace the opportunities in China.

Earlier this week, Xinhua reported that Morgan Stanley and Goldman Sachs planned to hire 50 percent more A-share researchers this year so as to meet the demand of foreign investors’ growing interest in China’s equity market.

But analysts say foreign investors are very rational.

“They won't just rush into China hot-headed," said Wu Kan, head of equity trading at Shanshan Finance, adding there were lingering concerns over creditworthiness of some China-listed companies, as well as Sino-U.S. trade relations.

(With input from news agencies)