Index provider MSCI will increase its exposure to China in many of its major indices, causing many money managers to re-adjust their China exposure and potentially raising demand for Chinese shares. Exchange traded fund investors can also capitalize on the move with country-specific plays focused on mainland China A-shares.
At the beginning of June, MSCI will for the first time add 222 domestic Chinese stocks, or A-shares, to its emerging market and global indices, reports Kate Beioley for the Financial Times.
The index changes will mean that passive funds with billions of dollars in assets under management will also need to make the necessary changes, shifting billions of dollars in investor money into China’s market.
That move is also seen as beneficial to an array of exchange traded funds, including the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: PEK), VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: CNXT), iShares MSCI China A ETF (BATS: CNYA) and db Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR). These ETFs track China-listed company stocks on the Shanghai and Shenzhen Stock Exchanges.
Index Changes and Trade Tariffs
However, the index changes also comes at a time when the U.S. and China are struggling with escalating tensions over trade tariffs and speculation of a full out trade war. The indices increased exposure to Chinese markets will cause many international investors to gain greater exposure to the heightened risks associated with the tiff between Washington D.C. and Beijing.