But MSCI appears to be hedging its bets because the inclusion of A-shares in its index has not come without caveats.
The index provider said further inclusion depends on seeing a greater alignment of the China A-shares market with international market accessibility standards and the resilience of Stock Connect.
It also wants to see a relaxation of daily trading limits, continued progress on trading suspensions, and further loosening of restrictions on the creation of index-linked investment vehicles.
Will Ballard, head of emerging markets and Asia Pacific equities at Aviva Investors, observes that a removal of the additional index construction rules MSCI has put in place could lead to A shares eventually accounting for 20% of the MSCI EM Index.
“By Bank of America Merrill Lynch’s March 2016 calculations, that could amount to a cumulative inflow of $320bn for China,” he added.
This would be a welcome boon for both China and global investors looking to capitalise on its growth story. The problem is it is likely to take a while to reach this point.
