MSCI announced that it was holding off on including A shares in it's emerging markets index.
MSCI Inc. held off from adding China’s mainland stocks to its benchmark indexes, opting to work with the nation’s securities regulator to overcome remaining obstacles to inclusion. Shares dropped in Shanghai.
The index provider expects to put yuan-denominated equities, also called A shares, in its global benchmarks after settling investor concerns about accessibility and share ownership through collaboration with the China Securities Regulatory Commission, according to a statement issued Tuesday. MSCI said a decision on inclusion may come at any time.
Chinese authorities have been pushing for an MSCI endorsement as they seek to elevate the status of mainland markets on the world stage and make the yuan a more international currency. Efforts to open up local shares to foreign investors, including an exchange link with Hong Kong, have already helped propel a $6.5 trillion surge in the value of Chinese equities over the past year.
“Some might regard it as disappointing that it didn’t happen immediately,” Shane Oliver, the head of investment strategy at AMP Capital Investors Ltd. in Sydney, which manages about $124 billion, said by phone. “By the same token, it looks like it’s going to happen anyway at some point. It’s just a question of when. They’ve just got some remaining issues to resolve.”
The Shanghai Composite Index retreated as much as 2.2 percent, before paring declines to 0.5 percent at the noon-time break.
The possible addition of mainland equities to MSCI’s global indexes has been a divisive issue among fund managers. Even as China’s stocks more than doubled over the past year, foreigners have been cautious about entering a market where retail investors account for 80 percent of trading.