An epochal shift for China's capital markets ?

An epochal shift for China's capital markets ?

by Pininvest Analysis

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Confirming an announcement made In July ‘2017, MSCI, the indices and data provider, will include a limited pool of some 235 mainland Chinese A-shares into its flagship emerging market index, in June and September ’18

To prepare for the inclusion of the A shares in the MSCI Emerging Market Index, MSCI has launched a China A Inclusion Index  in Oct. ‘17

The impact on capital flows into China is expected to be very large as US and international funds relying on the MSCI index will be buying more Chinese stocks to stay in line with the index – eliciting an initial inflow estimated at $17 to 18bn by MSCI – and may reach more than $300bn over time

At 0.7% weighting in the benchmark, the inclusion of Chinese shares remains small but MSCI has suggested larger allocations to Chinese stocks will go hand in hand with liberalization of the Chinese capital markets and, presumably, with sharp improvements of corporate governance

Check the 40 largest companies on Fortune (dated July '17)

Although we should remain cautious about the implications, as the current simmering trade tensions have somehow caught up with elaborate planning, the commitment to transparency, the endorsement of governance rules required by MSCI (along with the fight on corruption it implies) and the rule of law are all indicative of political commitments taken at the highest level of government

It stands to reason that we are witnessing an epochal shift in the way China conceives its relations with the world