The move is seen as beneficial to an array of China A-shares exchange traded funds, including the Xtrackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR). These ETFs track China-listed company stocks on the Shanghai and Shenzhen Stock Exchanges. However, these broad China A-shares ETFs remained in the slumps Friday.
Investors widely expect billions of dollars could help support Chinese A-shares ahead as global money managers adjust their positions to better reflect the new emerging market benchmark changes.
Close to 230 China A-shares appeared on index provider MSCI’s emerging markets benchmark. The partial inclusion of the A-shares, or yuan-denominated stocks traded on mainland stock exchanges, to MSCI’s widely observed Emerging Markets Index will take place in two phases, with the second phase coming in August.
However, the first wave of inclusions only makes up half a percent. MSCI is gradually bringing in China A-shares into its index, and full inclusion would make A-shares account for 16% of the EM index and push China to 42% of the benchmark.
“There is no practical reason advisors can’t start allocating larger sizes into China right now,” Oliver said.
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.