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June 16, 2017

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A-shares stand higher chance of MSCI inclusion

THE possibility of including China’s domestic A-shares in the global benchmark of index provider MSCI Inc this year has risen, Standard Chartered Bank said yesterday.

Alexis Calla, global head of investment and advisory of Standard Chartered’s group wealth management unit, said A shares have a 60 percent chance of being included in the MSCI World index this year, up from last year’s 50-percent chance.

The MSCI World index covers equities in 23 major markets globally and has US$2.7 trillion in assets benchmarked to the index.

“China is the second largest equity market in the world, which is a strong reason why it should be represented in the MSCI,” said Calla. “A lot of things have been done by the authorities to facilitate that.”

He referred to efforts to add a Shenzhen-Hong Kong stock connect late last year after the existing Shanghai-Hong Kong stock link.

A Shanghai-London stock connect is also in discussion by authorities in China and the UK.

Calla said it is likely for MSCI to first include shares under the stock connect programs to bypass some of China’s capital market restrictions.

MSIC in March renewed its plan of including Chinese A shares into its global benchmark by cutting the number of component companies from 448 to 169, mainly large-cap firms.

If approved, the weightage of A-shares in the global index would be 0.5 percent.

Observers have said the inclusion would not impact the market immediately due to the small weightage of the A-shares.


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