‘MSCI wrong to include China shares’
HONG KONG: Global index provider MSCI was wrong in its landmark decision to include mainland China-listed “A” shares in its emerging markets index last month, according to nearly half of the international investors surveyed for a new report into Chinese corporate governance.
MSCI’s decision to add domestic Chinese stocks for the first time to its benchmark global emerging market indices, tracked by an estimated US$1.9 trillion (RM7.72 trillion), was seen as a milestone in the opening up of China’s markets to international capital.
Yet 48 per cent of foreign investors surveyed by the Asian Corporate Governance Association (ACGA) said MSCI was wrong to include China’s Ashares in its indices, compared to just 27 per cent who felt that inclusion was correct.
The survey results were contained in an ACGA report, which examines what it called “China’s unique system of corporate governance”.
Governance has long been a hot topic for investors looking at China, but the MSCI decision put it under an even brighter spotlight because fund managers who benchmark to its indices must now invest onshore.
The survey reported that 59 per cent of investors felt they did not understand corporate governance in China, including practices around the responsibilities of non-executive directors, supervisory boards and Commu- nist Party committees.
The ACGA survey suggests that Chinese authorities, who hope to see more A-shares added to the MSCI benchmark over time, need to do more to assuage overseas investors’ fears, particularly when it comes to listed Chinese companies’ governance structures.