[Comprehensive News] In the early morning of March 1, Beijing time, MSCI (Morgan Stanley Capital International, translated as "MSCI" in Chinese), an American index compilation company, announced a major positive news, increasing the weight of China's A-shares in the MSCI index from 5% to 20%. Some institutions believe that this increase may attract more than US$80 billion (about RMB 534.7 billion) of new foreign capital into the A-share market.
The picture shows people in Hangzhou, Zhejiang Province understanding the market trend in front of the stock market data display screen. (Photo source: China News Service data photo)
421 stocks will benefit
Shanghai Observer Network reported that MSCI finally decided to increase the weight of China's A-shares in three steps.
Step 1: As part of the semi-annual index review in May 2019, MSCI will increase the existing Chinese large-cap A-share inclusion factor in the index from 5% to 10%, and at the same time include the Chinese GEM large-cap A-shares with a 10% inclusion factor.
Step 2: As part of the quarterly index review in August 2019, MSCI will increase the inclusion factor of all Chinese large-cap A-shares in the index from 10% to 15%.
Step 3: As part of the semi-annual index review in November 2019, MSCI will increase the inclusion factor of all Chinese large-cap A-shares in the index from 15% to 20%, and will include Chinese mid-cap A-shares (including qualified GEM stock ) into the MSCI index with a 20% inclusion factor.
After completing these three steps, MSCI Emerging Markets Index has 253 large-cap A-shares and 168 medium-cap A-shares, with the estimated weight of these A-shares in this index of about 3.3%.
MSCI expects that the inclusion factor of A-shares will be increased to 100% in the next 5 to 8 years. Once A-shares are fully included, the weight of A-shares in the MSCI index will reach 13% from the current 0.8%.
will bring about 80 billion US dollars of incremental funds
This time, MSCI will increase the inclusion factor of A-shares from 5% to 20%. The industry estimates that the incremental funds brought to the A-share market will be around 500 billion (RMB, the same below).
Shanghai The Paper reported that Xie Zhenggui, head of MSCI's Asia-Pacific Research Department, predicts that after the completion of all three steps, including mid-cap stocks, an estimated US$80 billion of overseas incremental funds will flow into A-shares. Bai Haifeng, director of the International Business Department of
China Merchants Fund, said, "Microsin expects that after the inclusion factor is increased to 20%, it is expected to attract more than US$80 billion inflows. But in fact, since A-shares are included in MSCI, the increase in foreign capital inflows, the proportion of active funds and the weight of MSCI inclusion have far exceeded market expectations." Chen Long, executive director of the Index Strategy Investment Research Department of
Chuangjinhexin Fund, estimated that this weight increase will add about US$66 billion of overseas funds to the A-share market. How will the
A-share market be interpreted?
"China Fund News" reported that Huachuang Securities said that inclusion in MSCI will be good for the stock market in the short term and will enhance its attractiveness to overseas funds, but the boosting effect will be weakened with the increase in the proportion of inclusion factors.
Currently, A-shares are included in MSCI in total: on June 1, 2018, the first inclusion factor of MSCI was 2.5%; on September 1, 2018, the inclusion factor of A-shares was increased to 5%. Judging from the stock market trend, A-shares rose in one month after MSCI's expansion, but the boosting effect weakened as the proportion of inclusion increased.
Morgan Asset Management Global Market Strategist Zhu Chaoping believes that MSCI is likely to increase the weight of A-shares this time, but given that the market is rising too fast, there may be concerns about active overseas funds entering the market. "They bought in to pursue medium- and long-term holding returns." Zhu Chaoping said that foreign capital is indeed continuing to enter, but the stock market may need to be digested when it reaches this point. (End)
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