MSCI increases inclusion factor

Index compiler MSCI Inc is to increase the inclusion factor for China's A-shares in the MSCI Emerging Markets Indexes. For 260 existing China A-share constituents, the inclusion factor will be increased from 0.1 to 0.15 from close on August 27.

Another eight A-shares will be added to the MSCI China Index at the same time, also with the inclusion factor of 0.15. 

After the implementation of this round of weight increase, A-shares will have a weight of 7.79 percent and 2.46 percent in the MSCI China and MSCI Emerging Markets Indexes, respectively.

There will be seven additions to and one deletion from the MSCI China All Shares Index. The three largest additions will be Haidilao International Holding, China Railway Group A and Wanhua Chemical Group A.

As for the MSCI China A Onshore Index, there will be 10 additions and no deletions, among which the three largest additions will be People's Insurance Co A, China Railway Group A and Wanhua Chemical Group A. 

The MSCI China All Shares Small Cap Index will see one addition and three deletions, while the MSCI China A Onshore Small Cap Index will remain unchanged.

The weight increase to be implemented at the end of August is estimated to bring an addition of funds reaching US$22.7 billion into the A-share markets, according to a report by China International Capital Corp.

MSCI has updated the list of China A Mid Cap securities that may potentially be added to the MSCI China and the MSCI Emerging Markets Indexes as part of the third and final step of the weight increase to be implemented at the November 2019 Semi-Annual Index Review. 

The inclusion factor of China A-shares will also be increased to 0.20 coinciding with the November 2019 Semi-Annual Index Review.

Morgan Stanley expects to see foreign capital inflows of US$70 billion to US$125 billion in A-shares in 2019, and there will be capital of at least US$100 billion to US$220 billion flowing into A-shares every year over the next decade.