Jan 11, 2019 (China Knowledge) - Net buying of Chinese A-shares via the Hong Kong northbound stock connect schemes by institutional investors increased by 50% to USD 45 billion after their inclusion into the MSCI indices.
In addition, northbound trading via the Shanghai and Shenzhen stock connects also accounted for between 5% to 10% of daily A-share turnover last year, up from just 1% in 2017.
Last year, MSCI included 235 Chinese large cap stocks into its benchmarks for the first time, giving Chinese A-shares a 0.71% weighting in its indices. This weighting will be increased to 2.8% once MSCI increases the inclusion factor of large cap securities to 20% and up to 3.36% with the inclusion of mid-cap Chinese stocks.
Since the MSCI inclusion, international fund houses have stepped up their buying of Chinese stocks, placing greater importance on the Chinese economy and its capital market in forming a diversified portfolio.
A forecast by the French investment bank estimates that total inflow into the Chinese A-share market may exceed USD 36 billion from just a 50% participation from active funds when index rebalancing activities are conducted by equity index compilers such as MSCI, FTSE Russell and S&P Dow Jones this year.
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