MSCI Takes China A-share

MSCI will include China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index.

 

This index provider said the decision had broad support from international institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market of both the Stock Connect program and the loosening by the local Chinese stock exchanges of pre-approval requirements that can restrict the creation of index – linked investment vehicles globally.

 

MSCI plans to add 222 China A Large Cap stocks, representing on a pro forma basis approximately 0.73% of the weight of the MSCI Emerging Markets Index at a 5% partial Inclusion Factor. A two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect. The first inclusion step would coincide with the May 2018 Semi-Annual Index Review followed by the second step which would take place as part of the August 2018 Quarterly Index review. MSCI reserves the right to revise the planned implementation to a single phase should the daily limit on Stock Connect be abolished or significantly expanded before the scheduled inclusion dates, the index provider said.

MSCI will start to calculate a number of MSCI Provisional Indexes as part of the MSCI ACWI Index Series that include China A shares. These indexes serve to manage the implementation of the inclusion of China A shares in investors’ portfolios on the schedule of their choosing. In particular, MSCI will launch the MSCI China A International Large Cap Provisional Index on June 21 2017,  followed by additional global and regional provisional indexes, including the MSCI China and MSCI Emerging Markets Provision all Indexes, in August 2017.

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