CSRC says world better served by inclusion of A-shares, omission leaves global indexes ‘incomplete’

PUBLISHED : Wednesday, 15 June, 2016, 11:47am
UPDATED : Wednesday, 15 June, 2016, 2:56pm

China’s top securities regulator said Wednesday that a global share index that leaves out A-shares is “not complete”, indicating disappointment over the decision by index compiler MSCI to delay the addition of mainland shares to its widely-followed emerging markets profile.

China Securities Regulatory Commission expressed its reaction in an online statement, hours after MSCI published its 2016 Market Classification Review, explaining that it would delay adding A-shares to its indexes for now.

CSRC spokesman Deng Ge said in a Chinese-language statement: “China is now the world’s second largest economy. The influence of A-shares is on a rising trend gradually in the international markets. Any international index which does not include the A-shares is not complete.”

“While MSCI decided to delay A-shares in its emerging market indices, this would not affect the progress of China’s capital market reform plans to develop a more market-oriented and properly regulated market. Establishing long-term stable and a healthy capital market is in line with our needs,” Deng said.

Global share index compiler MSCI said at in statement at 5am local Hong Kong time that it would not include China’s yuan-denominated A-shares in its emerging market indices, dealing a blow to hopes of new fund flows which could give the poorly performing index in the main Shanghai equity market a lift.

This is the third straight year that the MSCI has rejected A-shares. Reviews in 2014 and 2015 had cited limited foreign access and a lack of transparency in the market as reasons for a delay. The next review will be in 2017.

Deng said the CSRC learned from media reports about the MSCI decision to forgo A-shares in its emerging market indexes, which are tracked by pension funds, insurance companies and others institutional investors with US$1.7 trillion in assets.

Deng said the CSRC supports the MSCI “to review and to consider to include the A-shares in its indices. It is a commercial decision for MSCI to decide about the inclusion”.

The MSCI said its statement that Chinese authorities had made “significant improvements in the accessibility of the China A shares market for global investors”, an issue that it had previously cited as an impediment to inclusion.

“There have been significant steps toward the eventual inclusion of China A shares in the MSCI

Emerging Markets Index,” said Remy Briand, MSCI Managing Director and Global Head of Research.

“They demonstrate a clear commitment by the Chinese authorities to bring the accessibility of the China A shares market closer to international standards. We look forward to the continuation of policy momentum in addressing the remaining accessibility issues.”