Will China's A-shares finally be included in MSCI?

Global equity indexes provider Morgan Stanley's Capital Index (MSCI) will on June 20 (local time) announce whether China's A-shares will finally be included in its global benchmarks.

This is the fourth attempt for China's A-shares to be included in the MSCI Emerging Markets Index since 2013.

A-shares are shares traded on the two Chinese stock exchanges, namely Shanghai Stock Exchange and Shenzhen Stock Exchange, quoted in RMB.

A decision will be announced on June 20 as to whether China A-shares will be included in the MSCI Emerging Markets Index. /VCG Photo

Li Jing, JP Morgan managing director and vice chairman of Asia Pacific, said the probability is greater than 50 percent that China's A-shares will be added to MSCI Emerging Markets Index. She added that the Chinese market is becoming more and more important, and it is much easier for investors to buy stocks from the Chinese mainland after the launch of stock connect programs between Hong Kong and Shanghai and Shenzhen.

Investors can access approximately 1,480 Shanghai and Shenzhen-listed stocks through the programs without applying for a license and quota and subject to capital mobility restrictions.

A new proposal based on 'connect access framework'

The number of China's A-shares in the pro-forma MSCI China Index would be reduced to 169 from 448 under the latest proposal, according to the MSCI’s Consultation on China's A-share Potential Inclusion.

Only large cap companies which are accessible through the Shanghai and Shenzhen Stock Connect programs would be eligible, and the new proposal excludes A-shares that have H-shares listings included in the MSCI China Index and remove index constituents that have been suspended for more than 50 days.

The weight of RMB denominated stocks, or A-shares, would be just 0.5 percent of the MSCI Emerging Market Index, half the previous suggested level.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, speaks at the Quiet Revolution of Green Finance session during the Boao Forum for Asia Annual Conference on March 25 2017. /Xinhua Photo

China would be very happy to see the MSCI index inclusion of A-shares, Xinhua reported, citing an official statement from the Chinese securities authority.

"We have always wanted to see MSCI include Chinese mainland-listed A-shares in its global benchmarks ... we believe that any international stock index without Chinese A-shares is incomplete," said Fang Xinghai, vice chairman of the China Securities Regulatory Commission, at a news conference.

Fang also said that Chinese authorities are willing to discuss the issue with the MSCI stock index compiler, according to the report.

(Source: Agencies)