MSCI considers including China A-shares in MSCI Emerging Markets Index
20 June 2013
News, Asia, China, Korea, Taiwan
By Toby Garrod
MSCI announced last week that it was starting a review of China A‐shares for a potential inclusion in the MSCI Emerging Markets Index, driven primarily by a series of positive market opening measures and strong regulatory momentum over the past 12 months.
“We decided to do this in light of the significant changes that have taken place in the past year, such as the raising of the [qualified foreign institutional investor (QFII)] quota from US$30 to US$80 billion, the lowering of entry requirements for institutional investors in the QFII scheme, and more recently the regulatory changes in regard to capital mobility, such as the shortening of the repatriation window from a month to a week for open-ended China funds,” MSCI’s Asia head of research Chin Ping Chia tells Asia Asset Management.
The initiation of this consultation does not, in any way, indicate that the China A‐shares have already met the standards of emerging markets in terms of market accessibility criteria, MSCI notes. In fact, they say, a large number of key obstacles in the areas of capital mobility, quota allocation and taxation continue to exist and substantial progress would need to be made in order to warrant an inclusion in the MSCI Emerging Markets Index.
However, given the significant size of the China A‐share market and the possibility of further regulatory reforms in the short term, MSCI believes that it is important to actively engage with the international investment community on this matter. The speed and magnitude of any hypothetical inclusion will be entirely dependent on the speed and magnitude of actual progress in the opening of the market and the resulting experience of international institutional investors.
Additionally, MSCI announced that the MSCI Korea and MSCI Taiwan Indices would remain under review for a potential reclassification to developed markets.
More News >