What Does The MSCI Inclusion Mean For China A Shares And ETFs?

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The stocks will be added in a two-step process starting in May 2018 and will represent 0.7 percent of the index.

MSCI said that its decision to list Chinese shares had... With so much historical data available, investors may choose to look at many different time frames when examining a stock.

Foreign investors are betting United States index publisher MSCI will finally agree to include China-listed shares in its emerging markets benchmark this week, stepping up their buying of Chinese blue-chips that could gain from inclusion in the index. "In the short term, the exposure to China A share would be capped at 5%".

"Passive funds, index tracking is the future of global investing". Returns in the stock market may often mimic the amount of risk.

"When further alignment with worldwide market accessibility standards occurs, sustained accessibility is proven within Stock Connect and global institutional investors gain further experience in the market, MSCI will reflect a higher representation of China A shares in the MSCI Emerging Markets Index", said Briand.

In total, those 222 companies are worth $3.8 trillion in combined market value, but will account for a mere 0.7% of the MSCI's emerging market index.

Following four years of intense consultation and three failed attempts, MSCI has just added China A-Shares into its global indices.

China's financial system took another step towards integration with the rest of the world this week - but not quite the way that was envisioned years ago. Also on Tuesday, MSCI put off decisions on whether to reclassify Argentina as an emerging market and to demote Nigeria to standalone status. On the China side, the authorities have made large strides towards improving investors' market access, reducing stock suspensions and (reportedly) offering some concession on the preapproval requirement.

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The MSCI has already launched the MSCI China A International Large Cap Provisional Index.

How will inclusion proceed from here?

Active funds are expected to start entering the market once Saudi is on the watch list, whilst passive funds will enter when Saudi is actually part of the MSCI EM Index.

Given their tiny initial weighting, domestic Chinese shares will be dwarfed by the nation's overseas- traded stocks.

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Why a symbolic importance?

"MSCI is very hopeful that the momentum of positive change witnessed in China over the past years will continue to accelerate". "The more interesting fact is that the weight of Taiwan with GDP of less than half a trillion dollars is 50% higher (at circa 12%) as against weight of India with GDP of over two trillion (at circa 8%)", said Singapore-based Sanjay Guglani, chief investment officer at Silverdale Funds told Mint.

Why symbolism can still matter? However, with the rapid advancement in technology and information flow, and with political will, we believe China is likely to reach full inclusion in global indices.