Yahoo Finance MarketPulse: MSCI Expands Road to China's Mainland Markets
Investing.com - Global index giant MSCI shares moved higher Friday, propping up financials, after raising the weight of Chinese stocks in key indexes.
The company said it would raise the inclusion of China A-shares in its indexes to 20% from 5%, a move which will likely attract funds that had ignored stocks on the mainland market because of its limited weighting.
MSCI (NYSE:MSCI) rose nearly 3% on the news; the shares are up nearly 29% so far in 2019.
The cap will be lifted in three stages from May through August, rising to 10% in May to 15% in August and to 20% in November, the company said.
Traders cheered the news as it marked another significant step to further open the mainland's equity markets to foreign investors. It comes just months after a rule change in September allowed foreign investors working on the Chinese mainland to trade in the country's A-share market.
Before the reform, only foreigners with permanent residency in China had been allowed to trade freely in the A-share market.
For years, China has been taking to the road to win support from the investment community to get more of its mainland shares into global stock indexes, which usually attracts billions in capital inflows.
MSCI said the "strong commitment" by Chinese regulators to continue to improve market accessibility, including the "significant reduction in trading suspensions in recent months," was one of the factors that had won the support of international institutional investors.
The increased weighting has led some to speculate that this is far from a one-and-done move, but MSCI said in a statement that further increases beyond the 20% cap would require Chinese authorities to address key issues of market accessibility.
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