Joining The Elite Club

MSCI’s inclusion of China’s Ashares demonstrates recognition of the country’s reform efforts By Zhou Xiaoyan

Lin Hong, a 30-year-old stock investor living in Beijing, was thrilled upon hearing that Morgan Stanley Capital International (MSCI) decided to include China’s A-shares in its indexes. He expected the long-awaited move by the leading provider of global equity indexes would be a boon for his stock assets.

Lin invested roughly half a million yuan (about $75,000) in the then bullish stock market in the first half of 2015. The stock market, however, plunged just months later and has been in the doldrums ever since. Despite The decision has broad support from international institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A-shares market in terms of the Stock Connect program. It would also loosen the re-approval requirements for local Chinese stock exchanges that can restrict the creation of index-linked investment vehicles globally, according to the statement.

“International investors have embraced the positive changes in the accessibility of the China A-shares market over the last few years and now all conditions are set for MSCI to proceed with the first step of the inclusion,” said Remy Briand, MSCI Managing Director and Chairman of the MSCI Index Policy Committee, in a news release.

MSCI also announced that further inclusion will be subject to greater alignment of the China A-shares market with international market accessibility standards, the resilience of the Stock Connect program, the relaxation of daily trading limits, continued progress on trading suspensions, and further loosening of restrictions on the creation of index-linked investment vehicles.

Xu Hongcai, deputy chief economist with the China Center for International Economic Exchanges, a Beijing-based think tank, hailed the MSCI inclusion, calling it a milestone for China’s capital market.

“The successful inclusion of A-shares into the MSCI indexes will significantly boost the Chinese stock market. The symbolic event marks further alignment of China’s capital