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Invesco Global Insights

Countdown to MSCI China A-Share Inclusion

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Whether or not MSCI adds China A-shares to the MSCI Emerging Markets index as part of their next round of updates in June, we believe that implementation of a gradual inclusion process is only a matter of time given China’s central role in the emerging markets.

MSCI has previously indicated the need for Chinese regulators to address four issues prior to China A-shares being included in indices: (1) increasing market accessibility and capital mobility; (2) clarifying beneficial ownership issues, (3) eliminating pre-approval requirements for index-linked products and (4) curbing widespread voluntary trading suspensions.

In recent years China has taken a number of steps to help smooth the path to inclusion such as expanding foreign access to China A-shares through the Shanghai-Hong Kong Stock Connect program and clarifying uncertainty relating to beneficial ownership.

We anticipate that the inclusion of China A-shares in the MSCI index, whenever it occurs, will prompt global investors to increase emerging market equity allocations and shift toward a more holistic “China All Shares” approach to obtaining China exposure that will include China A-shares, H-shares and American depository receipts (ADRs).

Source : Invesco Real Estate

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