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MSCI to Add Chinese Mainland Shares to Emerging Markets

Energy producers and companies whose profits are most linked to economic growth, including makers of non-essential consumer goods and industrial producers, led declines.China’s securities regulator said on Friday that it hopes MSCI can open its index to China shares, but if not, Chinese capital market reform will not be derailed.The acceptance of some Chinese A shares into MSCI’s Emerging Markets Index was seen as a symbolic win for Beijing after three failed attempts. DEBORAH FUHR, MANAGING PARTNER AT ETFGI LLP IN LONDON “The inclusion of A shares in MSCI EM and other indices is (an) important step in the evolution of the Chinese stock market”.The MSCI Frontier Market Index Nigeria comprises of 16 companies listed on the Nigerian stock exchange such as Nigerian Breweries, GTBank, Zenith, Nestle, Dangote Cement, Forte Oil, Seplat and FBN Holdings. Concerns over repatriation limits of the money invested in A-shares have been lifted by using Stock Connect, a system that allows China-based investors to buy Hong Kong-listed shares and vice versa. “The upshot is that any initial boost to equities is likely to be small”. New York Federal Reserve President William Dudley said that inflation in the USA should rise more quickly going forward- presumably letting the central bank carry on tightening policy.It would be the fourth time China had attempted to be included by MSCI, having been ignored on the previous three attempts. “At the end of the day, this legitimizes Chinese investments for global investors”.”According to estimates from the JP Morgan investment bank, an additional US$1.37 billion in investment could be made through the new Emerging Markets index“, reported the Buenos Aires Herald.The MSCI Emerging Markets Index has performed well so far in 2017.iShares Core MSCI EAFE IMI Index ETF (XFH.TO) has a 14-day ADX of 19.18. Shuffling through the markets may get dizzying at times, but that little extra research might just help locate that diamond in the rough that has yet to break out.”We expect the central bank to really remain on the dovish side”, added Crédit Agricole’s Tresca. It’s going to dramatically change the scope of the weighting over time that we’re talking about.Investors might be searching high and low to find some good deals in the equity market. They want foreign investment firms with their knowledge and expertise to help institutionalize the markets.That could see a period of weakness for the local market and a sell off in the Aussie dollar because both have been seen as proxies for the China given our big exposure via our dependence on exports to China and the sensitivity of the market and currency to moves in commodity prices such as iron ore. But China’s actual total weighting is closer to 17 percent. BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO FUNDS MANAGEMENT, MENOMONEE FALLS, WISCONSIN “It was. widely anticipated that this subset of A shares would be included”. MSCI has cited the lack of openness of Chinese markets in the past as one of its reasons for not accepting China into the index. But for those active investors who wanted to participate in this part of China’s economy, they’ve already done so. The MSCI China Index has advanced 25 percent, trouncing a 1.2 percent gain in the Shanghai Composite Index.