China will have to boost economy if trade war worsens in 21 Nov - Even though Hong Kong- and foreign-listed Chinese stocks are included, the weights are usually well below the relative size of China in the global economy and equity market. There was some recovery in at 3. More from Prableen Bajpai.
Even though Hong Kong- and foreign-listed Chinese stocks are included, the weights are usually well below the relative size of China in the global economy and equity market.
From a timing perspective, was a roller coaster year in the A-share market while featured intensive investor concerns about the Chinese economy. Both years were less than ideal for foreign investors in China.
This year, however, the equity market has been stable, with valuations back to reasonable levels. For example, the Shanghai Composite Index currently trades at less than 17 times earnings. Depreciation pressure on the yuan has eased while sentiment about the Chinese economy has improved. No wonder some large asset managers have openly expressed interest in Chinese equities and endorsed the inclusion of A-shares in MSCI benchmarks.
Besides the above, we think Beijing has made significant progress in clearing the hurdles that prevented A-share inclusion in the past. These included restrictions on investment flows such as difficulties and time delays facing investors in applying for quota in the qualified foreign institutional investor scheme ; trading suspensions i. Chinese listed companies can voluntarily suspend their stocks in order to, for example, avoid market sell-offs ; and anti-competitive clauses i.
On capital restrictions, the two Stock Connects linking the mainland and Hong Kong exchanges have effectively resolved the issue by removing all investment quotas and repatriation limits. Interestingly, MSCI this year has proposed to narrow the universe of stocks for inclusion by focusing on only those available to the connect programmes.
With respect to trading suspensions, the number of stocks on trading halts have declined significantly to pre-crisis levels. And by focusing on a narrower set of large-cap stocks, the number of shares in trading suspension has fallen to just two, effectively clearing the second hurdle that prevented the inclusion last year. That leaves the pre-approval requirement as the remaining hurdle.
MSCI suggests that discussions with the onshore exchanges are ongoing, but it looks unlikely that a breakthrough will be achieved before the June announcement. This means that whether China succeeds in joining the MSCI this year will largely come down to how the anti-competitive clause is being assessed among other criteria.
We assign a greater-than-even chance for a positive verdict on June 20 but do acknowledge the risk of another failure if MSCI yields no compromise. For Beijing, having Chinese equities in a widely recognised global index offers a symbolic importance for its capital market liberalisation, similar to what the International Monetary Fund did for the yuan. True, there will be passive index trackers, which have to adjust their asset allocation once A-shares are added to the benchmarks.
But because of the smaller universe, there will only be stocks eligible for the index. Plus, MSCI will phase out the inclusion over a period of time, with the initial inclusion factor of only 5 per cent. It is perhaps for that precise reason of lacking market substance that Chinese investors have taken a more circumspect view towards the index inclusion this year. Skip to main content. Wednesday, 07 June, , 7: Wednesday, 07 June, , Opinion Will market gloom lead to economic doom?
Opinion Emerging market bulls need to rein in their optimism 3 Jan Opinion As state control increases, will China ditch capitalism again? Today we estimate that over USD A wide variety of financial products and services are based on or use MSCI Indexes, including ETFs, mutual funds, insurance products, structured products, OTC derivatives and listed futures and options.
Some of the MSCI indexes that have been licensed for use in financial products are profiled in the expanders below. In addition, constituent data for some MSCI Indexes underlying certain listed derivatives is also included below. MSCI reserves the right to restrict or remove access to this data without notice.
The eligible securities are ranked in the decreasing order of free float-adjusted market capitalization. The EM 50 Index also applies eligibility screens to exclude some of the smallest Emerging Markets countries and uses depositary receipts for certain markets that are less accessible to foreign investors. The index is designed to serve as the basis for derivative contracts, exchange traded funds and other passive investment products. At each full semi-annual index review, the number of constituents is restored to Between these reviews the number of index constituents may differ from due to deletions resulting from corporate events on existing constituents.
The index has a base date of December 31, With 42 constituents as of Dec. The MSCI Philippines Index is a free-float adjusted market capitalization weighted index that is designed to track the equity market performance of Philippine securities listed on the Philippine Stock Exchange. The MSCI Singapore Free Index is a free-float adjusted market capitalization weighted index that is designed to track the equity market performance of Singapore securities listed on Singapore Stock Exchange.
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