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MSCI's A-share move set to boost capital market structure

By Cai Xiao | China Daily | Updated: 2018-05-24 09:07
[Photo by Zhang Haijun/For China Daily]

The steady progress in the MSCI's inclusion of Chinese A-shares is expected to bring in more long-term institutional investors, and improve the market structure and investment practices of the nation's stock markets, experts said.

The comments come close on the heels of global index provider MSCI Inc's decision to add 233 A Shares to the MSCI China Index as well as relevant global and regional composite indexes from June 1.

"More long-term institutional investors will seek opportunities after the MSCI announced the list of Chinese shares that will be included in its benchmark equity indices," said Shi Bin, head of China Equities at UBS Asset Management.

"Since China's A-share market is largely dominated by individual investors, their participation will change the market structure," said Shi.

"Also, the long-term institutional investors with value investment philosophies will improve the investment practices of the nation's stock markets," he added.

"International investors are investing more than ever into A shares due to the enduring strength and stability of China's growing economy," said Jing Ulrich, vice-chairwoman of Asia-Pacific at JPMorgan Chase & Co.

"We believe more Chinese companies will be added to the MSCI China Index and the potential of the domestic capital market will be huge," said Ulrich.

Ma Wenya, general manager of Chengdu-based asset management company Sunday Fund Co Ltd, said it was good news that the MSCI's inclusion of Chinese A-shares will bring in more long-term institutional investors because they can bring advanced investment ideas and more sophisticated investment risk warnings.

The country has been taking gradual but resolute steps to open up the financial sector to boost the Chinese financial sector's international competitiveness and ability to serve the real economy.

The opening-up measures won the MSCI's recognition in June 2017, when the MSCI announced it would partially include large-cap China A-shares in the MSCI Emerging Markets Index and the MSCI ACWI Index.

"With the increased liberalization and internationalization of the China market, investors have expressed a clear need for more insight and tools to make better informed investment decisions," said Theodore Niggli, head of MSCI's Asia-Pacific index products.

Darwin Hung, index analyst at Instinet Pacific Ltd, said although investors don't expect MSCI to accelerate the inclusion of A shares in the short term, everyone will still be interested to know when MSCI will expand the list to include midcap and non-Stock Connect stocks as that would greatly increase the weighting of A shares in its emerging market Index.

Xinhua contributed to the story.

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