I've been living on another planet. Experts feel the inclusion of 222 China A large cap stocks is unlikely to have any major impact on India but there may be outflow of around United States dollars 215 million in the near term due to rebalance of portfolios across the globe by fund managers.
MSCI's decision to give so-called Chinese "A" shares the green light - after having rejected them for three years - marks a symbolic victory for the Chinese government, which has been working steadily over the past few years to open up its capital markets.
The MSCI decision is likely to provide at least a temporary boost for the Chinese shares that will be included.
There were two key changes from a year ago.
Remy Briand, MSCI managing director and chair of the MSCI index policy committee, says the expansion of the Shanghai-Hong Kong Stock Connect program has been a game changer for the accessibility of China A shares and contributed to inclusion's approval.
From next year, those funds will be obliged to buy the Chinese shares on the index.
Finally, the decision on the potential removal of the Nigeria index from the Frontier Markets index has been delayed to November 2017 to allow more time for worldwide institutional investors to better assess the effectiveness of the new FX trading window introduced by the Central Bank of Nigeria.
The new indices become fully effective in August 2018.
In the results of its latest classification review, MSCI delayed the inclusion of Argentina and Nigeria in its Emerging Markets index.
UK PM May forms minority govt after election gamble backfires
As one teaching student at the University of London told VOA, "I think most of us here were against Brexit past year ". Two weeks earlier, a suicide bomber killed 22 people as they were leaving an Ariana Grande concert in Manchester.
"With approximately $2 trillion in active and passively managed money tracking it, MSCI's EM Index is a significant dictator of equity market flows".
The full list comprises 222 stocks.
South Africa's rand stabilised too having been spooked by talk of changing the central bank's mandate, Hungary looked set to slosh more cheap money into its banking system, while Russian stocks were on their best run in nearly two months.
"We must continue to make efforts to further strengthen the market through reforms and build investor confidence so that we may maximize our position in 2018 to be formally listed alongside other global markets in MSCI's Emerging Market Index", he observed.
The Saudi Stock Exchange (Tadawul) said it has been named by MSCI, a major provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools, to its Emerging Market Index watchlist. The stocks that were not eligible to trade under the Stock Connect were removed in the 2017 consultation.
Gary Greenberg, head of emerging markets at Hermes Investment Management, remains wary of corporate governance issues in China.
Listing Aramco in Riyadh would approximately double Saudi Arabia's weighting in the emerging markets index, fund managers estimate, possibly making the kingdom a bigger presence in the index than Russian Federation and Mexico. As for everyone else, it is just one more signal that China is integrating with the rest of the world. "Over time the inclusion factor will be scaled up from the initial 5%, but given the way MSCI dealt in the past with "scaling in" large markets such as Korea and Taiwan, this will take place over many years".
"Over the long term, assuming further liberalisation and regulatory reform of the mainland stock markets, the depth of China's A-share market could mean China gains substantial weight within those broader indices".
The MSCI logo is seen in this June 20, 2017 illustration photo.
Comments