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​MSCI proposes dramatic weight rise for China's A-shares in its indexes

2018-09-27 09:41

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Morgan Stanley Capital International (MSCI) on Wednesday announced that it had launched a consultation on a further weight increase of China's A-shares in its indexes, the China Securities Journey reported. 

According to a statement released by MSCI, this consultation is based on the successful implementation of the five-percent initial inclusion of China's A-shares into the MSCI China Indexes and related composite indexes, such as the MSCI Emerging Markets Index.

As part of this consultation, MSCI proposes to raise the inclusion factor of the large-cap stocks already included in its indexes from five percent to 20 percent of their respective free float-adjusted market capitalization in two phases, with the first phase to be completed at its semi-annual index review in May 2019 and the second one at its quarterly index review in August 2019.

In addition, MSCI also plans to add the ChiNext board of the Shenzhen Stock Exchanges to its list of eligible stock exchanges starting from its semi-annual index review in May 2019.

What's more, middle-cap stocks in China's A-share market are also expected to be included in the MSCI indexes with an inclusion factor of 20 percent at the company's semi-annual index review in May 2020.

The consultation came four days after FTSE Russell, a British index giant, disclosed that it would decide on whether to include China's A-shares into its indexes system on Sept. 27.

As a world-leading provider of research-based indexes and analytics, MSCI added 226 A-share stocks to the MSCI Emerging Market Index with a 2.5-percent inclusion factor on June 1.

Three months later, MSCI included ten more A-share stocks to the MSCI Emerging Market Index and raised the corresponding inclusion factor to five percent.

Analysts from the Chongqing-based Southwest Securities estimate that this latest round of weight increase will bring up to 365.56 billion yuan (53.18 billion U.S. dollars) in foreign investments to China's A-share market.

Data from the Shanghai-based Haitong Securities show that the amount of foreign investments currently accounts for only six percent of the total market value of the A-share market, which remains far behind the Japanese and South Korean stock markets. 
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