Sep 26, 2018 (China Knowledge) - MSCI Inc. <NYSE:MSCI> has announced the launch of a consultation on increasing the weight of China A-shares in the MSCI Indexes, yesterday. The consultation has followed the successful implementation of 5% inclusion of China A-shares in in the MSCI China indexes and related composite indices, such as the MSCI Emerging Market Indexes, back in May and August this year.
With the unprecedented reforms to opening up of its market, investors are looking positively at the potential of Chinese financial market. Following the overwhelming positive feedback from market participation, MSCI has welcomed feedback from the investment community on the proposal to increase more Chinese companies in its index by 15 February next year.
MSCI has proposed for the increase of the inclusion factor of MSCI China A Large Cap securities from 5% to 20% of their free float-adjusted market capitalization, in two phases next year, at 7.5% each time. The proposed changes will coincide with the company Semi-Annual Index Review in May and the Quarterly Index Review in August.
Following the inclusion of MSCI China A Large Cap securities, the company will also be adding China A Mid Cap securities with a 20 inclusion factor as part of the Semi-Annual Index Review, in May 2020.
Besides that, MSCI also proposed for the addition of ChinNext board of the Shenzhen Stock Exchange to the list of eligible stock exchange segments, slated to begin next year in May. The company has included a list of 168 companies, updated as of 3 September 2018 to be included in MSCI China A Mid Cap Index.
The inclusion and proposed increased weightage of Chinese securities to the MSCI index, is largely symbolic for China. MSCI is the world’s biggest index compiler, with roughly USD 12 trillion in assets benchmarked to its products. This will encourage billions of dollars to follow into the Chinese financial market, the second-biggest equity market in the world.
As of 24 July 2018, there are 236 companies that are included in MSCI China A inclusion Indexes. Some big names include Bank of China <3988:HK>, Ping An Bank Co <2318:HK>, PetroChina Co <857:HK>, and ZTE Corp <763:HK>.
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