MSCI index weight rise to bring more fund inflows to China A-shares
Global index provider MSCI's latest move to further increase the weighting of China A-shares in its equity indexes is expected to bring more funds into the mainland stock market, according to estimates from a Chinese investment bank.
MSCI announced Friday (Beijing time) that 204 China A-shares, 189 of which are mid caps, will be added to the MSCI China Index and the inclusion factor for 268 existing constituents will be increased from 15 percent to 20 percent.
China A-shares will have weights of 12.1 percent and 4.1 percent in the MSCI China and MSCI Emerging Markets Indexes, respectively, after the adjustment. All changes will be effective after the market closes on November 26, according to MSCI.
The new increase of weighting in the widely tracked indexes will draw another US$35 billion to US$40 billion of funds to the A-share market, according to China International Capital Corporation.
It believes the additional fund inflows after this adjustment will be 50 percent to 70 percent larger than the amount of funds attracted after the previous two weight increases.
MSCI announced in March a three-stage plan to increase the inclusion factor for China A-shares in MSCI indexes from 5 percent to 20 percent, seen as a recognition by international investors of China's progress in reforming and opening up its capital market.