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INVESTMENT: Will MSCI be listed in Chinese mainland A-shares?
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Will MSCI be listed in Chinese mainland A-shares?

By Anthony

BT 201707 INVESTMENT 02
      近来,有关把中国A股中的股票纳入MSCI指数系列中的新兴市场指数的成分股列表的消息传播得沸沸扬扬。之所以A股股票被纳入MSCI指数受到如此大的关注,是由于一个市场的股票,只有先被纳入了前沿、新兴、发达国家三个分类指数后,才能够进一步获得成为MSCI全球市场指数成分股的资格。那么MSCI是什么呢?MSCI指数的全称是Morgan Stanley Capital International Index,翻译即摩根士丹利资本国际指数,中文名称是明晟指数;它是由摩根士丹利公司旗下MSCI公司编制的股票指数。MSCI指数是全球投资组合经理最多采用的基准指数,影响力最大,没有之一。

      MSCI中国A股只是单独境内指数,未纳入新兴市场指数范畴,但中国A股对MSCI指数也是不可或缺的重要组成部分。所以,虽说中国是占比最高的新兴市场,但是只有将A股纳入MSCI中国指数进而纳入MSCI新兴市场,才能使A股吸引到主流资金。A股被外国投资者视作投资金矿,目前已有一些积极迹象。首先投资者可以使用这些A股平台,对资本流动没有限制,其次MSCI正在其EEM基金中增加大盘股,据分析师认为,中国大盘股在未来一年可能将有喜人涨势。

      MSCI的新兴市场已经从根本上成为一个以中国为主的市场,因为在投资方中,十大投资方有八个投资方来自中国或台湾,纳入A股这一举措将巩固这一趋势。另外,此举也标志着中国金融市场放松管制的重要转折,可以进一步促进国内股票市场长期健康发展,也有助于中国经济成熟健康发展;即使被再度婉拒,也不会影响中国资本市场改革开放的进程和市场化、法治化方向。

BT 201707 INVESTMENT 01
June 20th will be a watershed moment for Chinese stocks and Chinese investment for good or for ill. The day marks the decision on whether or not MSCI will list Chinese mainland A-shares stocks into its famous iShares MSCI Emerging Markets ETF (EEM). These A-shares are essentially stocks bought and sold on the Shenzhen and Shanghai exchanges which are not allowed to be bought and sold by foreign investors. Juxtaposed to B-shares, meaning stocks bought and sold on mainland markets which can be sold by foreigners, A-shares are truly considered to be a potential goldmine for foreign investors having a bit more appetite for risk and growth.
 

BT 201707 INVESTMENT 0401While the firm has not included these A-shares on its huge EEM fund which has unequivocally outperformed its peer emerging market funds, the exclusion of A-shares is increasingly looking like it will change as has been anticipated by analysts and investors the world over. In conjunction with this inclusion come a number of positive signs for investors.
 

Firstly, the framework under which investors would have access to these A-shares - a platform called Stock Connect - has no quota requirements, is open to all investors without a license, has no restrictions on capital mobility and is essentially freely open in offering investors a large degree of liquidity and easy currency convertibility. Secondly, and more attractively, MSCI is looking to only add large cap stocks into its EEM fund as Chinese large-caps are likely to be the most profitable over the coming year according to analysts such as Blackstone.
 

In spite of all this positive news, it is probably best not to throw all of your money into MSCI’s highly successful emerging market fund just on the basis of the decision on the inclusion of A-shares. While the decision in the affirmative of the inclusion of A-shares would likely give the fund a short-term positive boost, implementation of A-shares into the EEM portfolio would probably not be until June of 2018, at least according to Nick Yeo at Aberdeen Asset Management.
 

hl investFurthermore, movement in the EEM fund is susceptible to much more than just Chinese macroeconomics or Chinese B-shares. The fund is one of the most diverse emerging market funds with equities throughout Asia (mostly), but is also invested in companies in South Africa, India, Mexico, Brazil, Russia, Turkey, and others. Because of this, the fund is extremely diverse and will most likely not be too influenced, at least in the short term, merely on the decision to include A-shares into the fund which won’t even be absorbed into the investment strategy for some time.
 

On top of all this, A-shares under consideration are short listed since MSCI is seemingly setting a high bar for stocks that they are willing to implement into the portfolio. Business Insider has reported this list is limited to only around 100 or so funds, most of which will only be slightly invested in. Because of this, at the end of the day the A-shares may only make up around 1 or 2 percent of the entirety of the fund’s investment strategy. This is also highly subject to change since it is quite an active fund or a fund that oftentimes divests and reinvests depending on various components.
 

BT 201707 INVESTMENT 05
At the end of the day, is the inclusion of A-shares into MSCI’s fund really all that important? All the talk in the chattering class as of now seems to be highly centered on this inclusion. Overall, yes it is a very important for the fund despite the A-shares potential share into it. The move marks a significant turning point as far as deregulation in the Chinese financial markets based on the higher standards is concerned in which the country is forcing its state-owned enterprises to uphold. These moves towards deregulation of China’s capital account will hold reverberations throughout the entire financial system and in turn the entire economy. The long and incredibly incremental march towards liberalization may appear to be insignificant, but it is not. Each decision in the direction of deregulation is important for healthy maturing of China’s economy. This is just another component of this general trend.
 

MSCI’s emerging market fund is already fundamentally a China-oriented one since eight out of top ten most invested in equities are either in China or Taiwan. This step to implement A-shares will only solidify this trend. Furthermore, the move is highly anticipated and can only be interpreted as a positive sign for the fund and also for China’s market reform. Investors should hope that the move is established if they are also investors looking to cash in on China’s recent equity resurgence.
 

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