Magazine issues » Summer 2015

IN NUMBERS: China A-shares in numbers

China is already the largest single weight in MSCI’s Emerging Markets Index. Adding A-shares will underline its position as the world’s second-largest economy.

How much difference would it make to MSCI’s Emerging Markets Index to include Chinese mainland-listed stocks, known as A-shares? Quite a lot. According to a roadmap for inclusion, published by the index compiler in May, A-shares would account for more than a fifth of the overall index if they were all included. This would increase China’s weight to 43.6% – more than three times the size of the second-biggest constituent, South Korea.

MSCI does not propose to add all the A-shares at once. The first step would be to include just 5% of the A-share universe, which would equal 1.3% of the overall EM index. Alongside this potential inclusion, MSCI plans to add overseas-listed Chinese companies, which will initially account for about 3.5% of the overall index (2.8% when all A-shares are added). The overseas listings are due to be included between November and May 2016; the A-shares additions are still provisional.

The next step would be to increase the percentage of A-shares in the index. MSCI says it needs to see further improvements in the quota allocation mechanism and in the size of overall quotas under the various access schemes, such as RQFII, before it does that. The index provider also calls for further relaxation on capital mobility, for instance a loosening of the limits on the Shanghai-Hong Kong Stock Connect.

Should the Chinese regulators meet MSCI’s requirements, the proportion of A-shares in the EM index can be expected to rise, ultimately ending in the situation previously mentioned when A-shares take up a fifth (20.5%, to be exact) of the overall index.

To get to full inclusion would take further reforms, however, namely the abolishment of the quota system, further liberalisation of capital mobility restrictions and a broad alignment with international accessibility standards. China in numbers

©2015 funds global asia


Industry comments

Investing in tomorrow’s world

investmentAt times like these, HSBC Asset Management easily pivots towards emerging markets.

The spotlight on growth markets and the need to be nimble and dynamic is ever-sharper, given the difficulty in predicting monetary policy in the world’s major nations.

Sponsored feature: Navigating the complexities of FX execution and currency risk

A comprehensive, cost-effective, and transparent currency overlay hedging solution is crucial to mitigate FX exposure risks in the complex landscapes of Japan and China's FX markets, explains Hans Jacob Feder, PhD, global head of FX services at MUFG Investor Services.

Opinion

Transitioning to an era of scarcity

The world is transitioning from an era of commodity abundance to one of undersupply. Ben Ross and Tyler Rosenlicht of Cohen & Steers believe this shift may result in significant returns for commodities and resource producers over the next decade.

Asia credit: An outsized winner in the region’s energy transition?

Ross Dilkes, fixed income portfolio manager at Wellington Management, examines the opportunities and risks for bond investors presented by the region’s decarbonisation agenda.

A quiet revolution in Japan’s corporate governance

revolution, Japan, corporate governance, Shareholders, corporate, governance, standards, improvement, Tetsuro Takase, SuMi TrustShareholders in Japan no longer accept below-par corporate governance standards. Changes are taking place, but there are still areas for improvement, says Tetsuro Takase at SuMi Trust.

Why rising demand for healthcare is creating investment opportunities in China

rising demand, healthcare, investment, opportunities, China, Robert St Clair, Investment Strategy, Fullerton Fund ManagementRobert St Clair, head of investment strategy at Fullerton Fund Management, explores the reasons investors should be paying attention to the rising demand for healthcare in China.

Executive Interviews

Executive interview: PGIM CEO on where the ESG flowers should bloom

Sep 27, 2021

David Hunt, president and chief executive of PGIM, tells Romil Patel about leading a top 10 global asset manager in times where “empowering and encouraging the kind of investment decisions as...

Executive interview: Nicolas Moreau’s orderly transition

Jul 12, 2021

Nicolas Moreau, CEO of HSBC Asset Management, is moving to Asia as the firm looks to connect more directly with the region’s growth story. ESG is also a key focus – including the ‘just’ carbon...

Roundtables

India: An “obvious choice for global investors”

Jun 22, 2023

Funds Europe, the sister publication of Funds Global Asia, hosted an India investment discussion with two seasoned experts and asked if India is the ‘last one standing’ from the Brics phenomenon. We also hear that for India, the inclusion of Indian bonds in a major index may not be the desired...

Roundtable: Singapore comes of age as an Asian ESG hub

Dec 01, 2021

Strong ESG credentials strengthen the case for Singapore as a leader in Asia of the post-Covid recovery. Our panel discusses the risks and opportunities.