China's A-share likely to be added to MSCI indexes

A man checks A-share data on his smartphone. Foreign institutional investors have shown greater interest in China equities after the A-share market dropped 20 percent in 2016. (Photo/Provided to China Daily)

China's A-share is very likely to be included into Morgan Stanley's Capital Index (MSCI) global benchmarks this year, Shanghai Securities News reported on Tuesday.

The number of China A-shares in the pro-forma MSCI China Index would be reduced to 169 from 448 under last year's proposal, according to the latest version of MSCI's Consultation on China's A-share Potential Inclusion.

The new proposal, based on "connect access framework", plans to include only large-cap companies that are accessible through the trading links with Hong Kong, exclude A-shares that have H-shares listings included in the MSCI China Index and remove index constituents that have been suspended for more than 50 days.

Li Jing, JP Morgan managing director and vice chairman of Asia Pacific, said that China's A-share is very likely to be added to MSCI Emerging Markets Index, and the probability is greater than 50 percent as the Chinese market is becoming more and more important and it is much easier for investors to buy stocks from the Chinese mainland after the launch of stock connect programs between Hong Kong and Shanghai and Shenzhen.

Investors can now access approximately 1,480 Shanghai and Shenzhen-listed stocks through the programs without needing to apply for a license and quota and subject to capital mobility restrictions.

China is very happy to see the MSCI index inclusion of A-shares, Xinhua reported, citing an official statement from Chinese securities authority.

"We have always wanted to see MSCI include Chinese mainland-listed A-shares in its global benchmarks ... we believe that any international stock index without Chinese A-shares is incomplete," said Fang Xinghai, deputy head of the China Securities Regulatory Commission (CSRC) at a news conference.

Fang also said that Chinese authorities are willing to discuss the issue with MSCI stock index compiler, according to the report.

This is the fourth attempt for Chinese A-shares to be included in the MSCI Emerging Markets Index since 2013 and the MSCI decision will be announced on June 20, according to Shanghai Securities News.