New York/Hong Kong: US index provider MSCI Inc. said on Tuesday it would hold off on adding China-listed stocks to one of its key benchmarks, a major disappointment for Chinese policy makers who had sought to satisfy MSCI’s calls for improved access to its capital markets.
The inclusion of domestic Chinese stocks into the widely tracked MSCI Emerging Markets Index could prompt asset managers, pension funds and insurers to pour up to $400 billion of funds into mainland China’s equity markets over the next decade, according to analysts.
MSCI said it put off inclusion of the Chinese shares in order to take more time to assess the effectiveness of the Qualified Foreign Institutional Investor (QFII) quota allocation and capital mobility policy changes as well as the effectiveness of the new trading suspension policies, adding that the repatriation limit remained a “significant hurdle."
In a statement published on its website, MSCI said it will not add so-called Chinese “A" shares, which are listed in Shanghai and Shenzhen and denominated in yuan, to its key index, tracked by $1.5 trillion of managed assets, just yet.
“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index," Remy Briand, MSCI managing director and global head of research, said in a statement.
The company said that Chinese authorities had made significant improvements in the accessibility of the market for global investors and were moving in the right direction. MSCI added that it would consider the China A shares’ inclusion as part of its 2017 review and had not ruled out a potential off-cycle announcement should further positive developments occur ahead of June 2017.
This is the third year running that MSCI has given A shares the thumbs-down, after first floating the idea of adding them to the benchmark in 2013. Reuters