New additions to MSCI on May 28
Twenty-six China “A” shares will be added to the MSCI China Index, while 30 equities from Saudi Arabia and eight Argentine securities are set to join the MSCI Inc’s emergingmarket stocks benchmarks, in steps that could potentially draw billions of dollars of inflows.
MSCI, which announced the additions of Saudi Arabia and Argentina last June, said the stocks would join its indexes as of the close of trading on May 28.
Argentina will account for 0.26 per cent of the MSCI Emerging Markets index, while Saudi Arabia will have a 1.42 per cent weight.
The China “A” shares would be left with a 1.76 per cent weight in the broad developing-nation gauge, it said.
The China gauge will have 31 additions in total, including five that are not “A” shares.
MSCI is the world’s biggest index compiler and its emergingmarkets index is the most important for the asset class, with as much as US$1.8 trillion (RM7.51 trillion) in assets benchmarked to it as of June last year.
The stocks are being added at a time when developing-nation assets are in the midst of a sell-off tied to increased Sino-American tensions, with Chinese shares in particular in the firing line.
Foreigners are dumping mainland China-listed shares at a record pace. Already this month, 17.4 billion yuan (RM10.54 billion) of “A” shares have been sold through trading links with Hong Kong, putting this month well on track to surpass the 18 billion yuan outflow last month.
Chinese stocks remain some of the best performing in the world this year, yet about US$1 trillion has been wiped from the country’s equity markets in just three weeks as the trade dispute reignited.
The Shanghai Composite Index has fallen about six per cent this month, yet remains up over 16 per cent year-to-date.
Argentina’s inclusion had been long awaited by investors, who saw last year’s returns wiped out by a peso rout that forced the government to seek a US$56 billion loan from the International Monetary Fund.
Saudi Arabia’s stocks have also suffered from geopolitical tensions, trimming gains fuelled by expectation for MSCI’s decision.
The Tadawul All Share Index slumped 3.6 per cent on Monday, the most since the killing of journalist Jamal Khashoggi in October.