Comment from Sean Taylor, CIO APAC at Deutsche Asset Management- MSCI’s inclusion of China A-shares in the MSCI Emerging Markets index
“In the short-term, MSCI Inclusion will initially have small effect on the amount of foreign money flowing into the Chinese market. Firstly, domestic shares will only comprise 0.73% of MSCI’s global emerging market index, with an estimated USD14bn capital flow from active and passive. Secondly, the inclusion will only begin in May 2018 and August 2018. In the near-term, A-shares market is subject to the risk of tightening liquidity due to financial de-leveraging, slower shadow banking activities and slower M2 growth. We expect H-shares and US traded Chinese companies to dominate investors’ interest.
In the medium term, MSCI’s decision should improve investors’ interest and confidence in the A-share market. These stocks are currently traded in the Connect Program, meaning a much improved access for global investors to the China A-share market. This also removed the concern of capital repatriation. It is an important milestone for more significant representation of A-shares in the index in the future and increased prominence of Chinese equities in global investors’ portfolio.”
Sean Taylor
CIO APAC
Deutsche Asset Management
With EUR 723 billion of assets under management (as of March 31, 2017), Deutsche Asset Management¹ is one of the world’s leading investment management organizations. Deutsche Asset Management offers individuals and institutions traditional and alternative investments across all major asset classes.
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