JPMorgan upbeat on China's equities markets with A-share's formal inclusion into MSCI

JPMorgan Chase & Co regards the A-share’s formal inclusion into the MSCI China Index a “historical moment” and said they will keep overweighting on China’s equity within the emerging market space in the near team.

The Wall Street banking giant said the inclusion marks a second very important “milestone” after yuan’s inclusion into the SDR basket.

The bank predicted a 6.7 percent growth of China’s gross domestic product for 2018, above the market’s consensus of 6.5 percent. The country’s economic fundamental and earnings outlook are the key drivers for its equity market performance this year, according to Zhu Haibin, chief China economist and head of China equity strategy at the global lender.

JPMorgan said that a total of 226 A-shares’ joining in MSCI will provide a much broader range of selection for the global investors when they try to access the China market, as the onshore stocks markets have a bigger share in sectors such as consumer staples, industrial, brokers, materials and healthcare.

In total, JPMorgan expects around US$7.7 billion passive inflow to MSCI China stocks, of which US$3.3 billion to the A-share market. It estimates that the active flows can be five times larger than the passive flows.

Zhu said that although the impact of the inclusion will be very limited, it is a very important step in China’s capital account opening-up process and a symbolic event of the capital market connectivity between China and the world.