China's stocks
took a major step towards global acceptance on Wednesday, finally
winning a long campaign for inclusion in a leading emerging markets
benchmark, in what was seen as a milestone for global investing. U.S.
index provider MSCI said on Wednesday Hong Kong time it would add a
selection of China's so-called "A" shares to its Emerging Markets Index
after having rejected them for three years running.
Inclusion
in the index marks a key victory for the Chinese government, which has
been working steadily over the past few years to open up its capital
markets, investors said.
Traders said MSCI's widely-expected "Yes" decision had been largely priced in, with the announcement triggering some profit-taking in blue-chips, which are no longer cheap after strong rallies this year.
Shanghai shares opened just 0.3 percent higher, and turning negative shortly after opening.
MSCI has been in discussions with Chinese regulators and global investors for four years over whether to add yuan-denominated shares to the Emerging Markets Index – tracked by around $1.6 trillion in assets – but excluded them because of restricted access to China's equity markets.
On Wednesday, the company said China had made enough progress in opening up its markets for MSCI to add a selection of 222 large-cap stocks.
The stocks, which would represent a weighting of just 0.73 percent in the benchmark, will be included via a two-phase process in May and August next year.
The move will see around $17 billion to $18 billion of global assets move into Chinese stocks initially, MSCI executives told reporters on Wednesday, adding that over the long-term the full inclusion of the China market could see more than $340 billion of foreign capital flow into the country.
Sebastien Lieblich, global head of index management research at MSCI declined, however, to provide a likely timeline for the full inclusion of "A" shares, saying it would depend on continued progress on China's reform agenda.
MSCI, he noted, would like to see China further relax controls on repatriating capital out of the country, and act to curb frequent share suspensions.
Traders said MSCI's widely-expected "Yes" decision had been largely priced in, with the announcement triggering some profit-taking in blue-chips, which are no longer cheap after strong rallies this year.
Shanghai shares opened just 0.3 percent higher, and turning negative shortly after opening.
MSCI has been in discussions with Chinese regulators and global investors for four years over whether to add yuan-denominated shares to the Emerging Markets Index – tracked by around $1.6 trillion in assets – but excluded them because of restricted access to China's equity markets.
On Wednesday, the company said China had made enough progress in opening up its markets for MSCI to add a selection of 222 large-cap stocks.
The stocks, which would represent a weighting of just 0.73 percent in the benchmark, will be included via a two-phase process in May and August next year.
The move will see around $17 billion to $18 billion of global assets move into Chinese stocks initially, MSCI executives told reporters on Wednesday, adding that over the long-term the full inclusion of the China market could see more than $340 billion of foreign capital flow into the country.
Sebastien Lieblich, global head of index management research at MSCI declined, however, to provide a likely timeline for the full inclusion of "A" shares, saying it would depend on continued progress on China's reform agenda.
MSCI, he noted, would like to see China further relax controls on repatriating capital out of the country, and act to curb frequent share suspensions.
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