On June 20, 2017, MSCI announced that it will add 222 China A Large Cap shares to the MSCI Emerging Markets (EM) Index. When the inclusion is officially launched in June 2018, China A Large Cap shares are expected to account for about 0.73% of the MSCI EM Index. As the latest note in a series of three1 on the globalization of China’s financial markets, this paper explains the background of the index change, estimates future changes in the Index composition, and also points out the potential implications on institutional investors if China A-Shares claim 17% or more in the MSCI EM Index.
- In the near term, the announcement has more of a symbolic meaning than actual impact.
- However, this tiny index change could potentially open up a huge opportunity in the future.
- Further inclusion of A-Shares could happen much sooner than the initial review process.
- The potential influx of institutional money could reach at least 5.3% of the value of all A-Shares.
- Institutional investors should understand the implications and adjust accordingly.
To learn more, download the full whitepaper above.
1 Aon research: Onshore Chinese Bonds Enter the Global Bond Universe, by Lucinda Downing Aon research: All Aboard the Through Train, China A-Shares, by James Jackson
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