Earlier this year, China A-shares, the stocks trading on mainland exchanges in Shanghai and Shenzhen, rallied in anticipation of index provider MSCI potentially adding those stocks to its international indexes, a move MSCI passed on.
However, MSCI is still monitoring A-shares for inclusion in widely followed benchmarks, such as the MSCI Emerging Markets Index. MSCI begins including China A-shares in its indices, Chinese shares would make up 1.1% of the indexer’s popular Emerging Markets Index tracked by $1.5 trillion in global funds, the Wall Street Journal Reports. HSBC projected the inclusion could add an additional $20 billion to $30 billion into Chinese stocks over the next year.
Chinese A-Shares are a specific class of equity securities issued by Chinese companies and denominated in RMB. Under current Chinese regulations, foreign investors may access A-Shares if they are a designated foreign institutional investor or gained access through either the Qualified Foreign Institutional Investor (QFII) or a Renminbi Qualified Foreign Institutional Investor (RQFII) programs.
“The start of the Shenzhen-Hong Kong Connect, a stock-trading link that will give foreign traders broader access to China’s $6.5 trillion market, could help address repatriation issues international investors face, the index provider said in a statement Thursday,” reports Elena Popina for Bloomberg.