MSCI, a major provider of indices to exchange-traded funds, has launched two new indices for the China equity market – the MSCI China A International Index and the MSCI China All Shares Index.

MSCI has launched two new China equity indices designed for international investors with QFII/RQFII quotas. (file image)

Both indices are designed for international investors with QFII/RQFII quotas and can be used as benchmarks or as the basis of index-linked products such as ETFs.

The two standalone indices reflect the full-inclusion scenario outlined in MSCI’s recent consultation document, which identified a roadmap for the inclusion of China A-Shares in the MSCI Emerging Markets Index, launched earlier this year as part of its annual market classification review.

This classification review concluded that, based on feedback from international investors, China A-shares should not yet be included in the MSCI Emerging Markets Index due to current investability constraints linked to the QFII/RQFII quota systems. However, many of those investors, especially those with QFII or RQFII quotas, wish to invest in China A-shares or to be benchmarked to a universe that includes this market segment.

“With the launch of these two new indexes, international investors who include or wish to include China A-shares in their current equity allocation now have appropriate benchmarks they can use within a consistent asset allocation framework,” said Alain Dubois, Managing Director and Head of New Business and Product Development for the index business at MSCI.

The MSCI China A International Index, which currently contains 221 securities, represents the A-share component of the MSCI China All Shares Index, which combines A, B and H Shares with Red and P Chips.

Both indices are built from an international investor’s perspective using the same methodology applied to all MSCI international equity indexes. In addition, the standalone MSCI China A International Index can be combined with the MSCI ACWI Index and the MSCI Emerging Markets Index to provide an approximation of the investment opportunity set if China A-shares were to be fully included in the MSCI Global Equity Indexes.