Leading US-based index to include Chinese stocks for 1st time

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Leading US-based index to include Chinese stocks for 1st time

It also advances President Xi Jinping's ambitions to make the yuan a global currency.

A spokesman for China's securities regulator said last week that any emerging market index would be "incomplete" without Chinese stocks.

According to the review, a two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect. - Adoption of new corporate governance rules issued by the Saudi Capital Market Authority (CMA) in February to enhance the rights of shareholders and board members and provide greater clarity and more transparency around determining commercial strategic planning, and roles, responsibilities and oversight of corporate entities and third parties.

"When further alignment with global market accessibility standards occurs, sustained accessibility is proven within Stock Connect and worldwide institutional investors gain further experience in the market, MSCI will reflect a higher representation of China A shares in the MSCI Emerging Markets Index", said Briand.

The development punctuates an extraordinary period during which China has sought to enter the mainstream of global finance while still maintaining a semblance of control over its markets.

"We expect the Chinese government to continue to open up the financial markets gradually", Ulrich added. However, gains were limited, as the MSCI decision had been priced in, analysts said. - Launch of a Real Estate Investment Trusts' (REITs) market to further broaden and diversify investment opportunities.

In May, overseas investors bought a net 19.8 billion yuan ($2.90 billion) of mainland shares via the "Connect" schemes that link the Hong Kong and China markets, pushing up volumes by 56 percent from the previous month.

Hence, MSCI has amended its original proposal to include all China A Large Cap shares accessible through Stock Connect that are not excluded due to trading suspension.

The decision means emerging market investors around the world will track companies listed in mainland China for the first time, which is a vote of confidence for Beijing. A gauge of technology stocks climbed 1.2 percent as the region's best-performing group, rebounding from its steepest weekly slide since November 11.

By late morning the blue-chip CSI300 index was up 0.6 percent at 3,568.74 points.

The stock of Ishares Msci Emerging Markets ET (NYSEARCA:EEM) registered an increase of 21.99% in short interest.

The New York-based equity index provider has in the past cited obstacles such as China's restrictions on market access and on moving capital in and out of the country.

"We're positive on the Chinese market but we prefer H-shares because we think there's more chance of A-share investors buying the H-shares.", said Sean Taylor, Asia Pacific chief investment officer at Deutsche Asset Management.

A decision to move Nigeria from frontier status to standalone was delayed to November.

The review is the fourth straight year MSCI has considered adding the mainland-traded stocks.

Watch for some weakness in the value of the Aussie dollar over time as well as investors sell local investment to redeploy funds into China to achieve index weighting. tracker or passive funds will be most notable. Investors may also have to master the art of being patient in the stock market.

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