— This is the script of CNBC's news report for China's CCTV on June 1, 2018, Friday.
For the A-shares to be included in MSCI index, it can be described as "Taking 6 years to sharpen a sword", The wall behind me, showing the A-shares that were first included in MSCI world list in June, 2013; from 2014 to 2016, after 3 years fail in review, part of A-shares were finally included until June last year. After 1 year preparation and adjustment, A-shares were formally included in 2.5% A-share today. And that is a "win-win" sword.
On the one hand, the total capital chasing MSCI index reached 3.7 trillion US dollars, and the 5% inclusion this year will contribute net inflow of 18.4 billion US dollars to A-shares market. On the other hand, this offers the global important funds a new important channel to invest in China. During these 6 years, China's financial market has undergone many reforms and opening up, and A-shares have finally succeeded in handing with MSCI.
However, some people also concern about the following trend of this timeline, which should be divided into short-term and long-term perspectives. In the short term, taking into account the free float market value of the A-share market as high as 3.4 trillion US dollars, the average daily turnover reached 75 billion US dollars.
Therefore, the inflow of funds resulting from joining MSCI may not have a great impact in the short term. However, in the long run, the inclusion of more A-shares in the MSCI Index will be an inevitable trend. MSCI estimates that after assuming a 100% share of A-shares, the proportion of A-shares will climb to 16.2% in the new MSCI market index; and the overall proportion of Chinese related stocks, including Chinese companies listed overseas, will account for 42% of overall proportion. For example, Henry Fernandez, MSCI's chief executive officer, said that MSCI does consider incorporating the mid-cap of A-shares in the next step, but currently, are the first 2 incorporating proportion of2.5% smooth? How's the accepting ability of international investors? Those are the factors that determine whether the mid-cap stocks can be included in MSCI or not.
And once this step is implemented, then the constituent stocks of MSCI emerging market index will increase to 1300 and more than 600 of them are Chinese business, we will keep an eye on this issue.