Investors react to MSCI
Wanda Film trading halted, tumbling almost 10% on market speculation
China’s A-share market opened buoyantly in Thursday morning trading, climbing higher over excitement about MSCI’s decision to include mainland shares in a key index. But gains were erased in the afternoon on profit-taking and weakness in small-cap stocks. Analysts, however, said they remained bullish about A-shares in the long run as a result of the development.
The blue-chip CSI 300 index rose 0.1 percent to 3,590.34 points, while the Shanghai Composite Index lost 0.3 percent to 3,147.45 points.
Shares in Shenzhen-listed Wanda Film, a listed arm of Chinese conglomerate Wanda Group, halted trading after tumbling nearly 10 percent on speculation about Wanda Group.
The company denied as “malicious speculation” market rumors that banks had ordered a sale of its bonds, and said it was operating normally.
Investors continued to pile into stocks that will potentially benefit from inclusion in the MSCI Emerging Markets Index. The US index provider said on Tuesday it would add 222 China-listed stocks to its Emerging Markets Index, tracked by around $1.6 trillion in funds, with the inclusion process starting in June 2018.
Fang Xinghai, deputy head of China Securities Regulatory Commission, said in a television interview Wednesday evening that the MSCI would include more A-share stocks in its key index.
He added that quotas for Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor programs — among the major channels for foreign investors investing in China’s market — were likely to be expanded accordingly.
Fang said it is likely that 30 percent of A-share listed stocks will be included in the MSCI key index. Currently more than 3,000 shares are listed on mainland’s A-share market.
The MSCI inclusion “paves the way for global capital inflows into China’s A-shares,” rating agency Moody’s said in a report on Wednesday, projecting roughly $11 billion in near-term fund inflows into mainland stocks from funds benchmarked to the EMI.
Citi China Securities Services said in a report that the MSCI inclusion of A-share stocks had long-term significance.
“Globalization of China’s capital markets is a gradual and inevitable process,” it said.
The firm said it believed that there may not be a sharp increase in the number of new QFII or RQFII license applicants due to the MSCI index inclusion, but foreign funds were likely to increase their investment quotas in response.
“We also expect to see an increase in the number of smaller overseas institutional investors accessing the A-shares via the Connect programs for the first time,” the report said.