Funds’ confidence in UAE equities rises
shanghai — Foreign buying of Chinese stocks were tepid on Thursday as benchmark indexes rose on the last trading day before mainland shares join MSCI’s emerging markets index.
A rebalancing of portfolios by global passive fund managers, as well as from some active investors, had been widely expected to spark a rush in investment into China’s capital markets on the eve of MSCI’s June 1 inclusion.
But on Thursday, just $1 billion flowed into Chinese stocks via Stock Connect, a key cross-border channel linking mainland and Hong Kong bourses. Some had expected $10 billion of inflows on the day, although active funds have been gradually raising their investment in Chinese shares over the past two months.
“In our view, the upcoming MSCI inclusion will trigger further northbound inflows despite the weak market environment, and Ashare valuations appear more attractive after the recent market correction,” said Gao Ting, head of China Strategy at UBS Securities.
The June inclusion will see around 230 Chinese large-cap stocks, known as A shares, added to MSCI’s emerging markets benchmark index with a 2.5 per cent partial inclusion factor. The second phase of the inclusion will take place on September 3. China’s MSCI entry will integrate the world’s second-biggest equity market, with a total stock market capitalisation of more than $8 trillion, into the global financial system.
Final list
On Wednesday, MSCI tweaked the final list of companies, dropping embattled Chinese telecommunications gear maker ZTE and four other firms whose shares have been suspended from trading.
Over the past 2 months, foreign investors have been ramping up investment in Chinese shares, including retailer Wangfujing Group, Shanghai Flyco Electrical Appliance and spirit maker Sichuan Swellfun, despite rising volatility triggered by fears of a Sino-US trade war.
On Thursday, northbound flows into Shanghai and Shenzhen amounted to about 6.6 billion yuan — a fraction of the more than 100 billion allowed each day, but still higher than in recent days.