MSCI’s recent Market Classification Review will result in adding 222 China A shares to the MSCI Emerging Markets and ACWI indexes starting June 2018. While partial inclusion of China A shares will not occur for another year, institutional investors may want to start planning for how this change may affect their portfolios, both in the short and long term.
Given the huge size of the domestic Chinese stock market, potential full inclusion of China A shares would significantly alter the scope of emerging markets benchmarks and create both opportunities and challenges for institutional investors. While some investors are well positioned for the change, many others might not be.
Key considerations for both the short and long term include:
- How do China A shares differ from other emerging market equities? How can institutional investors implement an A shares exposure?
- What would full inclusion of A shares in mainstream benchmarks mean for global institutional investors’ policy allocations to emerging markets?
- How would investors prepare for the potential full inclusion of A shares?
Source : MSCI