What next after China’s MSCI inclusion?
By , 22 Jun 17
Wealth and asset managers give their views on the implications of the MSCI inclusion of A-shares and where they find investment opportunities onshore.
Bank of Singapore’s head of equity research Sean Quek believes the actual inflows triggered by the index inclusion are not material and could be smaller than expected if some investors already have existing A-share positions or choose not to follow the recommended weights.
“Compared to the A-share 2017 average daily trading turnover of $65bn, the combined flows are not material,” he said in a research note.
Over the long-term, Quek forecast China A-shares could account for about 9% of the MSCI Emerging Markets Index while overall China, including those listed in Hong Kong, US or other countries, could account 34% in the index, compared to 28.6% at the moment, he added.
But it might take five-to-ten years for a full inclusion, based on the experience of Korea and Taiwan.
“Korea took six years and Taiwan nine years to reach full inclusion. We expect China could follow a similar path, taking five-to-ten years to full inclusion, with a gradual increase in inclusion weights along the way as capital flow restrictions are reduced and the A-share market converges closer to international rules.”