Adding U.S.-listed Chinese companies to MSCI's Emerging Markets (EM) index is not a gateway for the long-anticipated A-share inclusion, according to the global index provider.
"This decision is absolutely independent from any consideration of adding A-shares to the EM index. It's a much broader move," Sebastien Lieblich, MSCI's global head of index management research, told CNBC on Friday. "It just happens that China is strongly impacted by this enhancement in methodology, but there are also other countries [involved]."
Companies traded outside of their country of classification, i.e. foreign listed firms, were previously excluded from MSCI's regional indexes.
On Thursday, MSCI announced several changes to its equity indexes following the conclusion of its semi-annual review, with 14 tech-oriented Chinese names to be added to its $3.5 trillion market-cap EM index: Alibaba, Baidu, 58.com, Ctrip.com, JD.com, NetEase, New Oriental Education, Qihoo 360 Technology, Qunar, SouFun Holdings, TAL Education, VipShop, Youku Tudou and YY.
All changes announced on Thursday will be implemented as of the close of November 30 and MSCI said it will first add the foreign-listed companies at half their free float-adjusted market cap, and add the remaining market capitalization at the May 2016 semiannual index review.
The news comes as MSCI reviews stocks listed in mainland China, known as A-shares, for inclusion in the EM index. At a review in June, MSCI declined to immediately add the A-shares, saying inclusion was possible after structural issues, such liquidity and ownership, are resolved.
With Thursday's new additions, the weighting of Chinese stocks in the EM Index will rise to 26 percent, from 23 percent previously. The rebalancing could see around $7 billion move into these American Depository Receipts (ADRs) on the back of buying from funds that passively track the index.