(Yicai Global) June 21 -- Inclusion of China's A-shares in the MSCI Index is an important opportunity that gives impetus for China to reform and evolve its capital market, the official Xinhua News Agency reported an observer as saying.
It will also afford international investors access to invest in the Chinese market to gain mutually-beneficial results.
The scale and development dividends of China's capital market cannot be overlooked and A-share inclusion will help China further advance its reform and let the world better share in Chinese dividends.
The progress is less likely to bring huge amounts of funds into China's equity market in the short run, but international investors will increase their allocation to China's securities assets in the long run, market analysts predict. Inclusion of China's A-shares in the MSCI Index will trigger inflow of passive funds of about USD1.5 billion, and additional funds of some USD8.1 billion will flow into A-shares if active funds adjust their positions per changes to the index's weight.
China's equity market is so large that global investors cannot overlook it, said Brendan Ahern, chief investment officer at KraneShares CSI China Internet ETF [US:KWEB].
KraneShares introduced an ETF (Exchange Traded Funds) product three years ago which is pegged against China's A-shares, projected to be included in the MSCI Index, Ahern added.
Qiu Yanying, Chief Advisor at Pin Jin (Beijing) Asset Management Co., had a muted response to the news as he believes that the A-share market, as the world's second largest equity market, has gained an international status in proportion to its scale, while inclusion of the Chinese market will supplement MSCI's global 'map.'
Qiu believes the frequent interaction between A-shares and MSCI is a process of continuous self-improvement and opening for China's capital market. "Inclusion in the international mainstream index symbolizes the further enhancement of the degree of internationalization of China's equity market. The style of international capital in focusing on value investment is expected to exert a subtle influence on the speculative and volatile Chinese equity market, which undoubtedly reflects the significance of the event," he continued.
Li Xiaoxi, Managing Director of Principal Global Equities, expressed the same views. In addition to attracting more international funds, A-shares' inclusion in the MSCI Index will help introduce more international institutional investors and optimize the investor structure, enable A-shares to gain access to advanced international investment philosophies, and will serve as a market stabilizer in the long run, in his view.
Morgan Stanley Capital International (MSCI) announced today after four consecutive years of assessment that it will incorporate China's A-shares into the MSCI Emerging Markets Index and MSCI All Country World Index starting next June. MSCI, a well-known US index company, inaugurated its first index product in 1969, and is currently one of the world's most influential index providers.
MSCI says on its official website that it serves 97 of the current top 100 asset managers in the world.
After 40 years of development, MSCI indices have become the benchmark for most international investors, and the inclusion of a stock into an important MSCI benchmark index means that it may bring in considerable buying orders.