Investors remain optimistic that MSCI will add A shares to its Emerging Markets Index this year despite failed attempts in the previous three consecutive years.
Jing Ulrich, managing director at JP Morgan, said the probability of success of the fourth attempt was above 50 per cent.
MSCI, which is used by 97 out of 100 of the world’s largest money managers, has worked with central government authorities for years to include Chinese A shares in its index. If the New York-based index provider decides to include A shares, it could draw up to US$400 billion into Chinese stocks over the next decade.
“When it comes to MSCI inclusion, they always look at accessibility, transparency and, mostly, liquidity,” Ulrich said. “In the last several years, many Chinese companies were suspended from trading.” That made it “impossible” for MSCI to add A shares to the index, she said.
Ulrich added that the inaccessibility of the market to international investors also prevented A shares from being included in past years.
“But the chance this year for inclusion is higher compared to previous years because China has taken a lot of steps to address major areas of concern,” she said.
The weighting suggests that the inclusion initially will not have much of an impact