MSCI’s New Move

China’s stock market is expected to see a new inflow of global investment after the world’s top index provider MSCI Inc. announced the final list of Chinese shares to be included in its benchmark equity indices.

Some 234 domestically listed Chinese companies, ranging from China’s biggest liquor maker Kweichow Moutai, to banking giant Industrial and Commercial Bank of China, will be added to the MSCI system on June 1.

The inclusion of China’s A shares, yuan-denominated equities traded on mainland stock exchanges, in the MSCI indices will give foreign investors greater exposure to the world’s second largest stock market and also marks the further integration of China’s capital market into the global financial system, analysts said.

New York-based MSCI said on May 14 that the inclusion will be a two-step process with the initial inclusion of 234 Chinese A shares, where they will represent around 0.39 percent of the weighting on the MSCI Emerging Markets Index.

The second step will take place in September when the list of shares to be added to the MSCI will be further expanded and it will likely bring the representation of A shares to around 0.8 percent of the MSCI Emerging Market Index.

The inclusion of A shares means that foreign investors such as exchange-traded funds, pension plans and endowment funds will need to allocate the added Chinese stocks if they want to closely track the MSCI benchmark gauges.

UBS Securities estimated that the inclusion could lead to $18.4-billion inflow into the A-share market.