June 21 (Reuters) - U.S. index provider MSCI said on Tuesday it would add mainland Chinese stocks to its global emerging markets benchmark index, after having declined to do so for the past three years.
For an earlier INSTANT VIEW on reactions to the decision, see
MSCI plans to add 222 Chinese shares to its Emerging Markets Index, with an initial weighting of 0.73 percent.
The full inclusion of domestic Chinese stocks in the widely tracked MSCI Emerging Markets Index could pull more than $400 billion of funds from asset managers, pension funds and insurers into mainland China's equity markets over the next decade, according to analysts.
KEN JARRETT, PRESIDENT OF THE AMERICAN CHAMBER OF COMMERCE, SHANGHAI:
"The inclusion of some China A-shares into MSCI's emerging markets index is another sign of China's ongoing integration into the global financial system. We hope that the MSCI decision will spur domestic regulators to bring China's stock markets in line with global norms and make the regulatory environment more predictable, improve transparency in the stock market listing process, and bring stronger rule of law to the wider securities industry. This would mean not banning major stockholders from selling shares during periods of market turbulence, not suspending the trading of stocks outside the use of predetermined circuit breakers, and therefore not creating the conditions that lead to moral hazard."
MEDHA SAMANT, INVESTMENT DIRECTOR, FIDELITY INTERNATIONAL
"This has been a long awaited decision, so it's not entirely surprising. It will definitely now put Chinese companies on the map, these companies which were seen to be largely the domain of retail investors.
From a sentiment and symbolic perspective, it's significant. But for those active investors who wanted to participate in this part of China's economy, they've already done so.
The 0.7 percent inclusion, on an absolute level, doesn't look that big. But the fact is, when you look at the availability of companies, the size of the market, even a small shift makes a significant difference...A lot of them are in consumer and services sectors, which is what foreign investors find the most interesting part of China's growth.
As we move ahead, as more details emerge, there will be more interest...It's making it easier for foreign investors to understand and have access to these companies. As things develop further, and we think the regulator will be working on that, it will definitely mean expanding the universe a bit."
JOHN SIN, HEAD OF ASSET SERVICING FOR GREATER CHINA, BNY MELLON (via email)
"Despite the reduced A-shares index weighting of 0.73 percent, today's announcement represents a defining moment for the Chinese stock market. China's inclusion to MSCI's Emerging Market Index symbolises the continuation of China's inevitable rise and increased relevance within global portfolios. While the short and longer term impact will have to be monitored, investors will be cognizant that China's weighting and influence continues to increase."
GREG KUHNERT, PORTFOLIO MANAGER AT INVESTEC ALL CHINA EQUITY FUND (via email)
"At long last MSCI has included the second largest equity market in the world in their indices, thanks to improved accessibility from the Hong Kong and Shanghai/Shenzhen Connect programmes... We believe Chinese A shares bring great benefits to global investors, namely the ability to invest in a broader universe of ideas (over 3,000 listed A shares) that are more representative of the Chinese economy and its new growth drivers, along with greater diversification benefits from an overall portfolio volatility perspective. We believe in the long term that China as a country will play an outsized role in regional and emerging portfolios and may in itself become a unique asset class for asset allocators across the world." (Reporting by Nichola Saminather; Editing by Jacqueline Wong)