Chi­nese stocks gain wider world spread

The Star Early Edition - - BUSINESS REPORT - Xin­hua

CHINA won a mea­sure of recog­ni­tion from the world’s fi­nan­cial mar­kets yes­ter­day for its tire­less ef­forts to up­grade and in­ter­na­tion­alise its fi­nan­cial mar­kets.

Global eq­uity in­dex provider MSCI fi­nally in­cluded a num­ber of Shang­hai and Shen­zhen listed stocks in one of its most traded in­dexes, af­ter a de­lay of three years.

The MSCI an­nounced on Tues­day in the US (Wed­nes­day in Bei­jing) that from June 2018, it will in­clude some China A-shares in its EM (Emerg­ing Mar­kets) in­dex and ACWI (All Coun­try World In­dex).

MSCI plans to in­clude 222 China A large-cap stocks, ap­prox­i­mately 0.73 per­cent of the weight of the EM in­dex at a 5-per­cent par­tial in­clu­sion fac­tor, in its cal­cu­la­tions, ac­cord­ing to its 2017 mar­ket clas­si­fi­ca­tion re­view.

“MSCI in­clu­sion is a ma­jor step to­ward the in­ter­na­tion­al­i­sa­tion of China’s stock mar­ket. It will have a far-reach­ing ef­fect on the flow of global cap­i­tal,” said Shi Donghui of the Shang­hai Stock Ex­change.

Ac­cord­ing to Shi, the com­bined mar­ket value of Chi­nese stocks is nearly $8 tril­lion(R104.14trln), about a tenth of the world’s to­tal stock mar­ket cap­i­tal­i­sa­tion.

“The in­clu­sion meets the needs of in­ter­na­tional in­vestors and shows con­fi­dence in the Chi­nese econ­omy and fi­nan­cial mar­kets,” said Zhang Xiao­jun, spokesper­son for the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion.

Asia Se­cu­ri­ties In­dus­try & Fi­nan­cial Mar­kets As­so­ci­a­tion also ap­proved of the MSCI ac­tion, say­ing it was an im­por­tant step in the in­ter­na­tion­al­i­sa­tion of China’s mar­kets and im­prov­ing the in­vest­ment en­vi­ron­ment.

“In­ter­na­tional in­vestors have em­braced the pos­i­tive changes in the ac­ces­si­bil­ity of the China A shares mar­ket over the last few years and now all con­di­tions are set for the MSCI to pro­ceed with the first step of the in­clu­sion,” said Remy Briand, chair­per­son of the MSCI in­dex pol­icy com­mit­tee.

“The ex­pan­sion of Stock Con­nect has been a game changer for the mar­ket open­ing of China A shares,” said Briand.

MSCI first con­sid­ered adding Chi­nese stocks to its in­dexes in 2014, since then China’s mar­ket has been through a steady stream of ini­tia­tives to make lo­cal ex­changes more ac­ces­si­ble to the out­side world.

Trad­ing links be­tween Hong Kong, Shang­hai and Shen­zhen were sig­nif­i­cant steps, en­abling for­eign in­vestors to buy A-shares with fewer re­stric­tions than pre­vi­ous regimes. A con­nec­tion of the main­land and Hong Kong bond mar­kets is in the pipe­line.

While the an­nounce­ment of MSCI in­clu­sion is im­por­tant for China’s in­te­gra­tion with the global fi­nan­cial sys­tem, it will have lit­tle ini­tial ef­fect on cap­i­tal in­flow, said Shang­hai Stock Ex­change’s Shi.

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