China ETFs are benefitting after index provider MSCI Inc. announced it would quadruple its weighting of large-cap Chinese shares in its benchmark indexes. ETFs like the Direxion Daily FTSE China Bull 3X ETF (NYSEArca: YINN) could stand to benefit further if a U.S.-China trade deal materializes.
In a press release on Thursday, MSCI Inc. announced it would increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps. The decision came after an extensive global consultation with a large number of international institutional investors, including asset owners, asset managers, broker/dealers and other market participants worldwide.
MSCI said the proposal to increase the weight of China A shares garnered overwhelming support from investors.
“Stock Connect has proven to be a robust channel to access A shares. The successful implementation of the initial 5% 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. “The strong commitment by the Chinese regulators to continue to improve market accessibility, evidenced by, among other things, the significant reduction in trading suspensions in recent months, is another critical factor that has won the support of international institutional investors.”
“Overall, the final inclusion plan continues to look as aggressive as its proposal, marking another milestone in China’s capital market opening up,” Citi China equity strategist Jerry Peng said in a note dated Thursday.
In the following video, Chi Lo, senior greater China economist at BNP Paribas Asset Management, examines the state of China’s economy and progress made on U.S.-China trade agreement. He speaks on “Bloomberg Daybreak: Americas.”
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