Index provider MSCI has not included China A shares in its influential global emerging markets benchmark.
The decision was based on problems relating to market accessibility. MSCI says it will form a working group with the China Securities Regulatory Commission to try and fix the issue.
The index provider may announce the decision to include China A shares in the MSCI Emerging Markets Index as soon as the issues are resolved. This may happen outside the regular schedule of its annual market classification review.
Remy Briand, MSCI managing director and global head of research, says substantial progress has already been made towards opening the Chinese equity market to institutional investors.
Developments include the successful launch of the Shanghai‐Hong Kong Stock Connect program and the clarification of the capital gains tax.
Despite the decision, investors do not appear disappointed, even though an MSCI consultation had found investors were eager for the China A shares market to develop.
“Whilst there could be some short-term disappointment on the part of domestic retail investors around this decision, it is not a surprising decision and we don’t feel it will be a major market-moving event.” says Matthew Sutherland, investment director, Fidelity Worldwide Investment.
The index provider also says that it will include the MSCI Pakistan Index in its 2016 annual market classification review for a potential reclassification to emerging market status.
MSCI says it will also seek feedback from international institutional investors on the accessibility of the Saudi Arabia equity market following its opening up to foreign investors on June 1, 2015. This could lead to the market’s inclusion in the emerging market index.
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