BUSINESS More foreign fund inflow into Chinese stock market expected with further increase in weighting by MSCI: analyst

BUSINESS

More foreign fund inflow into Chinese stock market expected with further increase in weighting by MSCI: analyst

Global Times

16:34, November 11, 2020

The MSCI logo (Photo: VCG)

As more China A-shares are expected to be included in the equity indexes of global index provider MSCI, more foreign funds will continuously flow into the mainland stock market, an analyst told the Global Times on Wednesday.

There will be 58 additions to and 23 deletions from the MSCI China A Onshore Index, according to the results of the November 2020 semi-annual index review for the MSCI Equity Indexes released on Tuesday.

The three largest additions to the MSCI China A Onshore Index will be Chinese cooking oil giant Yihai Kerry Arawana, automaker Great Wall Motor and integrated circuit design company Montage Tech. There will be 293 additions to and 22 deletions from the MSCI China A Onshore Small Cap Index.

A separate index concerning China - MSCI China All Shares Indexes - has also made some changes: There will be 60 additions to and 55 deletions from it. The three largest additions to the index will be Yihai Kerry Arawana, biopharmaceutical company BeiGene and Chinese e-cigarette and vape manufacturer Smoore International.

There will be 354 additions to and 45 deletions from the MSCI China All Shares Small Cap Index.

The MSCI announcement came amid the one-year anniversary of MSCI's three-stage plan to include Chinese A shares in its equity indexes.

In November last year, MSCI announced that 204 China A shares, 189 of which are mid caps, will be added to the MSCI China Index and the inclusion factor for 268 existing constituents will be increased from 15 to 20 percent, the last phase of its inclusion plan.

According to MSCI's three-stage plan, which was announced in March 2019, it will increase the inclusion factor for China A shares in MSCI indexes from five percent to 20 percent. The move was widely seen as a recognition by international investors of China's progress in reform and opening-up of its capital market.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Wednesday that the inclusion of the MSCI index has brought tremendous changes to the A-share market in terms of incremental funds to A shares and the concept of value investment to the market.

"With allocation value of A shares on the rise, coupled with the appreciation of yuan assets, further introduction of inclusion can be expected, and foreign capital will continue to flow in," said Yang.

Yang noted that there are around 200 billion yuan ($30.32 billion) worth of foreign fund inflows into the mainland stock market so far this year. The figure was more than 300 billion yuan for the full year of 2019.

MSCI said its further weight increases for Chinese shares will depend on Chinese authorities addressing several common areas of concerns from institutional investors, such as the lack of effective hedging tools to manage China A-share risks, according to a Reuters report.

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