Markets

What is China’s A-share MSCI inclusion?

SHANGHAI: Global market research and index company MSCI Inc said on Tuesday it would add 234 China-listed shares to its emerging market benchmark in a two-step process in June and September, a move expected to drive a surge of foreign inflows into the country's stock markets.

While some foreign investors are still haunted by memories of China's 2015 stock market crash and concerns about Sino-US trade frictions, a deeper fear of missing out is widely expected to boost overseas investments in mainland stocks.
MSCI's decision last June to include yuan-denominated Chinese stocks, known as "A-shares", into its emerging market (EM) index triggered a rally in Chinese blue-chips in 2017, though the market has corrected this year amid fears that a trade war will undermine the world's second-largest economy.

But with the MSCI inclusion nearing, there are signs of renewed interest in Chinese big-caps as asset managers have been rushing to launch funds tracking MSCI A-share indexes.

MSCI, a US-based creator of widely-watched stock indices, will add 234 mainland traded big-caps to its benchmark Emerging Markets and All Country World Index indices. The companies are predominantly blue chips, like Shanghai-listed SAIC Motor Corp or famed liquor maker Kweichow Moutai Co Ltd .

Why is this important?

MSCI's indices are closely watched and trusted. Its EM index has funds with assets under management in excess of $1.6 trillion benchmarked to it. That means that when Chinese shares are added to the index, money that follows the benchmark will have to buy Chinese stocks to avoid deviation.

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