MSCI has launched 12 new China equity indices to help investors prepare for the next step of the China A-Share inclusion process.
Theodore Niggli, head of APAC index products, MSCI.
On 20 June 2017, MSCI announced it would partially include large-cap China A-Shares in the MSCI Emerging Markets Index and the MSCI ACWI Index.
It said the decision was undertaken as a result of the positive impacts on China A share accessibility of both the Stock Connect programme and the loosening of pre-approval requirements that have restricted the creation of index-linked investment vehicles, such as ETFs, globally.
As such, the index provider plans to add over 200 China A-Share Large Cap stocks to the MSCI Emerging Markets and MSCI ACWI indices at a 5% partial inclusion factor.
A two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect.
The first inclusion step coincides with its May 2018 Semi-Annual Index Review, effective June 1, 2018, followed by the second step which would take place as part of the August 2018 Quarterly Index review.
MSCI China, which currently includes large and mid-sized Chinese stocks listed outside of mainland China and available to international investors, accounts for nearly 30% by market cap of the MSCI Emerging Markets Index and over 3% of the MSCI ACWI Index as of October 2017.
At the time of the announcement, it was expected that the addition of China A Large Cap shares would add 0.73% to China’s existing weight of nearly 30% in the MSCI Emerging Markets Index.
The new MSCI China A-Share indices follow the MSCI Global Investable Markets Index methodology as well as the Stock Connect eligibility constraints for large-cap and mid-cap companies.
According to MSCI, these indices expand the range of the MSCI China All Shares indices that represent the opportunity set of the integrated MCSI China equity universe where China A shares are fully represented. The new indices also broaden the range of the MSCI China A International indices which represent the A-Share component of the MSCI China All Shares index, excluding the Stock Connect eligibility constraints.
Theodore Niggli, head of APAC index products, MSCI, commented, “We are proud to announce the launch of this new suite of China indices. With the increased liberalization and internationalization of the China market, investors have expressed a clear need for more insight and tools to make better informed investment decisions.”
The new indices are as follows:
MSCI China A Index
MSCI China A Large Cap Index
MSCI China A Mid Cap Index
MSCI China A RMB Index
MSCI China A Large Cap RMB Index
MSCI China A Mid Cap RMB Index
MSCI China All Shares Large Cap Index
MSCI China All Shares Mid Cap Index
MSCI China All Shares SMID Cap Index
MSCI China A International Large Cap Index
MSCI China A International Mid Cap Index
MSCI China A International SMID Cap Index