High probability for MSCI to include China A-shares in emerging markets index

A decision to whether include Chinese mainland-listed A-shares into its emerging market index will be taken by the stock index firm MSCI on Wednesday. China Securities Regulatory Commission’s department of international cooperation chief Qi Bin has urged for including A-shares into MSCI’s emerging markets index.

“You can’t wait too long. We take a very open attitude to MSCI’s decision, but it will be included sooner or later,” said Qi Bin.
 
Currently, Chinese shares already listed in emerging markets index are traded either in New York or Hong Kong. China already accounts for 26.8% of the MSCI EM index through shares of Chinese companies. If Chinese A shares are fully included, it will bring the ratio to over one third. In June 2015, MSCI had rejected the Chinese shares, mentioning uncertainty regarding who is the owner of the shares and how investors can withdraw their money easily from China’s investments. According to certain analysts, China, since then, might have reformed its market in order to get included.

Bocom International chief China strategist Hong Hao told FxWirePro that the chances are “better than last year”. With regard to the impact of including A-shares, Hong Hao said “historical significant is bigger than short term impact”.

Different banks have provided different odds of Chinese mainland A-shares being included in the emerging market index. In May, Goldman Sachs increased the likelihood of inclusion from 50% to 70%, whereas HSBC mentioned a possibility of “better than 50”. Meanwhile, according to Citigroup, there is a 51% chance of inclusion.