Mainland China stocks end higher after MSCI’s revised proposal for A share inclusion

MSCI proposed cutting the number of A-share firms in the Emerging Market Index to 169 from 448, with weighting down to 0.5pc from 1pc

PUBLISHED : Thursday, 23 March, 2017, 9:04am
UPDATED : Thursday, 23 March, 2017, 10:57pm

Mainland China stock markets ended slightly higher on Thursday after global index maker MSCI issued a revised proposal to include A shares in its Emerging Market Index.

The Shanghai Composite Index experienced a “V-shaped” curve to end 0.1 per cent higher at 3,248.6, the CSI 300 Index closed up 0.4 per cent to 3,462, and the Shenzhen Component Index gained 0.3 per cent to 10,583.

Separately, the Hang Seng Index in Hong Kong closed virtually flat at 24,327.7 while the Hang Seng China Enterprises Index edged up 0.3 per cent to 10,487.5.

MSCI published a new consultation paper on its website regarding the inclusion of mainland Chinese A shares into its Emerging Market Index. The paper proposes cutting the number of A-share companies listed in the MSCI Emerging Market Index to 169 from 448 under last year’s proposal, while the weighting would fall to 0.5 per cent from 1 per cent.

The only companies considered for inclusion would be large-cap shares already accessible to foreign investors through the Shanghai and Shenzhen stock connect schemes with Hong Kong, according to the new proposal. MSCI will make a decision in June.

“The new proposal indeed increases the chances for inclusion after three years of failure but the impact of the inclusion is going to be very trivial...more like a symbolic move,” said Zhu Bin, analyst at Southwest Securities.

In China’s B-share market, which is traded in US dollars primarily by foreign investors, the Shanghai Stock Exchange B Share Index at one point slumped 4 per cent, but recovered to close at 343.4, down 1.8 per cent.

The new proposal indeed increases the chances for inclusion after three years of failure but the impact of the inclusion is going to be very trivial
Zhu Bin, analyst at Southwest Securities

“I don’t think the B shares’ movement was the result of the MSCI proposal. B shares are in a severe [state of] lack of liquidity and we saw sudden drops without specific reasons before. But indeed it would affect the sentiment in the A-share market,” Zhu said.

Hong Kong’s stock market, meanwhile, was more driven by company earnings on Thursday.

Acoustics tech supplier AAC Technologies ended 10.1 per cent higher at HK$95.3, outperforming its blue-chip peers after it reported record net profit and revenue for 2016.

Ping An Insurance was up 1 per cent to HK$43.7, boosted by a 15 per cent rise in its annual net profit.

Tech giant Tencent fell 1 per cent to HK$223 after it posted a 41.1 billion yuan (US$6.41 billion) net profit last year, missing the 44.1 billion yuan estimate by analysts in a Bloomberg poll.

“Corporate earnings are the major drivers today,” said Alex Wong Kwok-ying, a fund manager at Ample Finance Group. “The sentiment is pretty bullish after US markets stabilised from Tuesday’s sell-off.”

Wong said the Hong Kong benchmark has yet to show a large gain because investors are still waiting for some blue-chips to post annual results.

China Mobile shares dropped 3.4 per cent after the company posted 0.2 per cent net profit growth, becoming the worst performer among the blue chips.

Oil major CNOOC saw its shares edge down 0.5 per cent before it announced a 97 per cent year on year drop in net profit to 637 million yuan.

China Vanke, China Merchants Bank, Meitu and Sinopec Group are scheduled to announce their annual results on Friday.