MSCI to significantly increase weight of China A-shares in global indexes

NEW YORK, March 1 (Xinhua) -- Global index provider MSCI plans to increase the weight of China A-shares, or Chinese mainland shares denominated in yuan, in the MSCI indexes, by raising the inclusion factor to 20 percent in three stages this year, MSCI announced late Thursday.

The move is expected to spur investment in the A shares listed in the Chinese mainland equity market as the MSCI indexes are a benchmark and often the underlying basis of numerous financial products worldwide.

Estimates by financial institutions show they expect the change to lead to an inflow of around 60 billion U.S. dollars in the A shares.

The announcement came after an initial inclusion of China A shares since mid-2018, with the inclusion factor currently capped at 5 percent.

"The successful implementation of the initial 5 percent inclusion of China A shares has been a positive experience for international institutional investors and has fostered their appetite to increase further their exposure to the mainland China equity market," said Remy Briand, MSCI managing director and chairman of the MSCI Index Policy Committee.

MSCI said it will increase the index inclusion factor of all large cap China A-shares in the MSCI indexes from 5 percent to 10 percent, and add ChiNext large cap shares with a 10 percent inclusion factor in May. Then, the percentage of all large cap China A-shares in the MSCI indexes is scheduled to rise to 15 percent in August. The third step will see the percentage to reach 20 percent in November.

Meanwhile, MSCI will also add mid cap China A-shares, including eligible ChiNext shares with a 20 percent inclusion factor to the MSCI indices.

Upon the completion of the plan, there will be 253 large cap and 168 mid cap China A-shares, including 27 ChiNext shares, on a pro forma basis in the MSCI Emerging Markets Index, representing a weight of 3.3 percent in the pro forma index, said the statement.

The decision came after MSCI consulted a large number of international institutional investors, most of which backed the three-step proposal.

Based in New York City, MSCI provides equity, fixed income, hedge fund and stock market indexes, and asset portfolio analysis tools for global investors.