MSCI once again refrained from adding China A shares to its emerging market index, a move which could have invited billions of Dollars into China from asset managers, who track MSCI indices. MSCI is tracked by more than $1.5 trillion worth of money. Investment bank Goldman Sachs suggested that there was sixty to seventy percentage chance that they may be included this year.
This is the third year in a row when MSCI decided against adding Chinese A shares to its index. However, it has sounded constructive about the issue that there could be an off the cycle addition. Bank of America Merrill Lynch considers that to be very unlikely.
However, looking at market reactions, it seems that market was already pricing that MSCI will not include China’s stocks into the index. Moreover, recent drivers to the stocks have been more global, like FED decision and British referendum.
Naturally China’s benchmark index, Shanghai composite is up today by 1.6 percent in line with global peers. It closed at 2887 today.
Nevertheless, any inclusion would have been a major boost for the stocks but MSCI’s decision shows more reforms are required in China both in terms of economy and capital markets.
The material has been provided by InstaForex Company – www.instaforex.com