China’s A-Shares Risk Exclusion From MSCI EM Index If Delay In HK Stock Link Drags On

MSCI, a global equity index provider, whom has been considering adding stocks of mainland China listed firms — or A-shares — to its benchmark emerging market index, said that the odds of this happening are not likely if there would be a considerable delay in launching the pilot scheme that is to link the Shanghai and Hong Kong stock markets, according to Reuters.

MSCI had been weighing adding China’s A-shares to its emerging market index earlier this year, but in June made the decision not to do so, however MSCI said that they would review such a possible move in 2015.

China, which is the largest emerging market in the world, already is the largest component of MSCI’s benchmark emerging market index with over $1.3 trillion global assets under management.  However, if MSCI was to decide to include the A-shares into its index, billions upon billions of addition dollars in investment would flow into the Chinese stock markets as investment funds tracking the index would have to adjusted their holdings by buying these shares.

“In the end we have a timetable in this process,” Chin Ping Chia, the Managing Director of MSCI Hong Kong told Reuters on Monday.

“If nothing happens by the end of this year, stretching to June of next year, you can expect that we are not going to make any change,” Chia added.

In order for MSCI to observe the operation of the pilot scheme and the time needed for investors to prepare for the new environment, the January-to-June time frame would need to be met, Chia said.

“If the program is not launched, we are back to square one, looking at (other stock investment pilots) QFII and RQFII, and given we are fresh off the consultation I think we pretty much know the view of our investors,” Chia said.

Source: Reuters