If MSCI does decide to include Chinese A-shares in its benchmark Emerging Market Index, China’s reputation in the global market could be enhanced as fund managers that track the emerging market index passively acquire China A-shares to augment their position.
[related_stories]Consequently, China A-shares markets and country-specific ETFs could also find support from the increased demand from asset managers. For instance, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest U.S.-listed China A-shares ETF, previously attracted a lot of attention ahead of the major index talks surrounding mainland Chinese stock inclusion.
The road to China A-shares inclusion into MSCI Emerging Market Index may take a while as many still remember the volatility and heavy-handed response from Chinese regulators.
“International institutional investors continue to be concerned by the significant liquidity risks that may result from potential renewed voluntary suspensions in trading on the local stock exchanges of mainland Chinese companies,” according to MSCI.
Nevertheless, FTSE Russell has already developed the FTSE Emerging Markets All Cap China A Inclusion Index, which holds Chinese A-shares. The Vanguard Group’s Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), the largest emerging markets ETF by assets, has also been slowly transitioning to the new index. [Vanguard Lands Massive RQFII Quota]