Is MSCI Set To Up Its China A Shares Exposure?

MSCI, one of the world’s leading providers of indices for investment markets, looks set to incorporate a greater weight for China’s mainland “A Shares” in the coming weeks.

Traditionally, MSCI, Standard & Poor’s, FTSE, and other index providers will include shares of companies in their leading indices in a prescriptive fashion, depending on the structure of the index.

However, when it comes to Chinese mainland shares, MSCI has chosen to hold steady on a ‘full’ inclusion in their indices. The index provider has opted to gradually raise their A Shares exposure over coming years, with full inclusion extending beyond 2020.

In 2018, MSCI released a consultation to understand the market and reaction to potentially increase the exposure to A Shares from 5% to 20%.

“This new consultation, explored in more detail in our new paper… was primarily motivated by strong validation for the Stock Connect trading channel, which allows international and Mainland Chinese investors to trade securities in each other’s markets, and continued improvements on overall market accessibility,” said Chin Pin Chia, MSCI’s Head of Asia Pacific Research.

Currently, A Shares are slated to increase their weighting factor to 20% next month.

Rival index provider S&P has indices focused on A-Shares, such as the S&P Access China A Index.

Fund Flows To Follow

As reported by CNBC, US investment bank Citi believes as much as $US200 billion in inflows will hit Chinese bond and equity markets in 2019, up from $US120 billion in 2018.

“Inflows from bonds and equities are likely to continue supporting China’s [balance of payments],” Citi said in a January 31st report.

The implications for Australian ETF investors with emerging markets (EM) exposure is significant, given that many index-focused investors have had a lesser exposure to China than they may have otherwise known. Vanguard FTSE Emerging Markets ETF (VGE) and SPDR S&P Emerging Markets ETF (WEMG) are EM-focused ETFs with China exposure 34% and 31.6%, respectively.

Over the past 30 years, China has grown to become one of the most powerful economies in the world, ranked number-two only to the United States. With changes underway, investors will be looking towards China to tap into the plethora of growth opportunities.

[ls_content_block id=”695″ para=”paragraphs”]

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report, and 24/7 access to the Rask community, for FREE by CLICKING HERE NOW or the button below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.