Explainer | What foreign investors need to know about China’s property market as MSCI adds to A-shares’ weighting
- As MSCI added to A-shares’ weight in its index, international investors will be more exposed to 14 China-listed developers
- Bigger weight expected to boost prices of these shares, analyst says
If you’ve yet to hear of Greenland Holdings, Seazen Holdings or China Fortune Land Development, don’t worry. You likely will be hearing more about them soon, if you are a foreign investor looking for more China exposure.
They are big developers in China’s quirky property market – a key driver of the economy and subject to much steering from Beijing and local governments. And they are well known to investors in the mainland China’s stock markets.
Now they will become a bigger part of some foreign investors’ portfolios, courtesy of MSCI, which this week gave them and 11 other mainland Chinese developers more weight in their indexes.
And because of that, it has suddenly become important for foreign investors to have a better understanding of the mainland China’s property sector.
MSCI doubled its “inclusion factor” of China-traded shares – known as A-shares – to 10 per cent. By November, when the inclusion factor is doubled to 20 per cent, A-shares will make up 3.36 per cent of the MSCI Emerging Markets Index.
In the MSCI China A Big-cap Index, the property sector holds the fourth-largest weighting, accounting for 14 of the 264 represented Chinese companies, behind non-bank financials, banks and pharmaceuticals.