Shares record biggest daily gain in 3 months on MSCI talk
Print Edition
CHINESE shares posted their biggest daily gain in three months yesterday on growing expectations that US market index provider MSCI could add mainland stocks to its emerging market benchmark for the first time.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 3.4 percent to 3,169.56, while the Shanghai Composite Index gained 3.3 percent, to 2,916.62 points. The CSI300 ended May around 0.4 percent higher while the Shanghai stock index is around 0.7 percent lower.
Despite yesterday’s bounce, Chinese stocks are the worst performing in Asia so far this year with the Shanghai stock market down about 20 percent, according to Thomson Reuters data.
In the currency market, the yuan posted its second largest monthly fall on record against the dollar in May amid growing hopes of a US interest rate hike in June.
Growing expectations that MSCI will add mainland shares to its emerging markets index for the first time boosted sentiment in Hong Kong and China.
“Investors are now betting China shares will be included into the MSCI Emerging Market index,” said Wu Kan, head of equity trading at investment firm Shanshan Finance.
Goldman Sachs increased the chances that MSCI would include mainland Chinese shares in its indexes to 70 percent, citing recent steps taken by the Chinese government to remove obstacles for global money managers to invest in the country’s equity markets.
The US bank joins a growing list of investors and brokers who have given Beijing a thumbs up in recent weeks ahead of the MSCI’s decision on June 14.
The expectations drove inflows with the CSOP FTSE China A 50 ETF — the largest offshore exchange-traded fund enabling direct foreign investment to Chinese shares — posting a net capital inflow of about 2 billion yuan (US$303.9 million) on Monday, the largest single-day inflow in the past year.
The enthusiasm spread to Hong Kong where shares closed at their highest level in more than four weeks. The Hang Seng Index rose to 20,815.09 points, while the China Enterprises Index of mainland stocks listed in Hong Kong gained 0.93 percent to 8,704.90.
Despite the broader market rise, a “flash crash” in the actively traded CSI 300 futures contract earlier in the session dominated trader talk and highlighted wider liquidity concerns in China’s markets.
The June futures contracts on China’s blue-chip CSI300 index plunged by the 10 percent daily limit at 10:42 local time, but recovered all its losses within that minute in high volume.
The China Financial Futures Exchanges didn’t answer calls seeking comment on the brief crash. The official Securities Times said on its website the exchange is investigating the matter and would release results later.
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