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On June 20, 2017, MSCI announced as part of its Annual Market Classification Review that it will include China A-shares into its global equity benchmarks. Here are three things to know about China’s inclusion in global equity indices.
This is a watershed event. We believe China’s strategy is to create more portfolio inflows into the country, which may help balance capital outflows—the world diversifies into China as China diversifies outward. Inclusion of A-shares in global equity benchmarks are a critical step in the process. In the near-term, portfolio inflows are likely to be modest given the limited initial A-shares weighting of 0.73% in the MSCI Emerging Market Index (China’s total country weight is 27.7% counting all share classes).
If China...
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