Singapore Markets close in 3 hrs 59 mins

MSCI considers lifting China weighting in benchmark index

Global equities index compiler MSCI has said it is considering quadrupling the weighting of Chinese large-cap shares in its benchmark Emerging Markets Index over the next two years as well as adding mid-caps and companies listed on the tech-heavy ChiNext board.

The proposal signals MSCI may increase China's profile in such indices at a faster-than-expected pace despite Chinese markets being among the world's worst-performing this year.

For the first time, US-based MSCI added more than 200 Chinese big-cap companies to its Emerging Markets Index earlier this year.

Following a second round of additions in August, five percent of the market capitalisation of Chinese big-cap firms is now reflected in the index.

But MSCI said in a statement on Tuesday that it was looking at raising that to 20 percent.

The move would take place by August 2020 and is contingent on receiving investor feedback before a final decision is made next year.

The increase would include, for the first time, more than a dozen companies from the ChiNext board, a NASDAQ-style board at the Shenzhen Stock Exchange in southern China.

MSCI may go further in 2020 by introducing mid-cap shares.

If all the changes are made, Chinese yuan-dominated shares would make up 3.36 percent of MSCI's Emerging Markets index, up from the current 0.71 percent.

MSCI cited the "successful implementation" of Chinese shares into its indices as a factor in considering a greater weighting.

MSCI's Emerging Markets Index and other indices are used by institutional investors to determine which shares around the world to add to their portfolios, and inclusion is expected to eventually lead to billions of dollars of new foreign investment in Chinese shares.

China's benchmark Shanghai stock index, however, has tumbled around 15 percent this year amid factors including the Sino-US trade war.

The MSCI announcement buoyed shares on Wednesday, with the Shanghai index rising more than one percent.

azk/dma/amu