China awaits damp squib of MSCI inclusion

MSCI will announce on Tuesday whether it will include China’s domestically-listed A-shares in its benchmark indices. It has chosen not to in the past on concerns over market access and official intervention. Another issue is the sheer size of China’s markets: weighted by market capitalisation, shares listed in China and Hong Kong would account for over 40% of the MSCI EM index. Some of the access concerns have been addressed. More important, MSCI has come up with a fudge to give A-shares only a token inclusion: they would account for only 0.5% of the EM index.  As such, the impact of China’s inclusion would be small. Perhaps US$8bn would flow into China’s stock markets as a result, equivalent to just 0.1% of domestic stock market capitalization.