MSCI will NOT Include China A-Shares in Emerging Market Index

by John Galt
June 14, 2016 17:14 ET

WOW! This will not help the Shanghai markets tonight and probably will cause massive tankage in Hong Kong also. Via CNBC:

Key MSCI emerging markets index rejects Chinese mainland stocks, again

MSCI on Tuesday said it would delay inclusion of the mainland-traded Chinese A shares in its key emerging market index.

In a release, MSCI said investors needed more time to assess the effectiveness of the Qualified Foreign Institutional Investor program (QFII) investment quota allocation, capital mobility policy changes and the effectiveness of the new trading suspension policies.

MSCI said it would retain the China A shares inclusion proposal as part of the 2017 review and did not rule out a potential off-cycle announcement “should further significant positive developments occur ahead of June 2017.”

MSCI was expected to announce its decision on including the mainland-traded Chinese A shares in its emerging market index around 5 p.m. ET Tuesday. With about $1.5 trillion in assets under management tracking the index, China is keen to tap those funds as foreign investors search for returns outside their home markets.

Last year, MSCI rejected the Chinese shares given concerns about market accessibility, liquidity and share ownership. The mainland Chinese stocks have had high volatility since then, including stock suspensions last summer and a circuit breaker fiasco in January. The Shanghai composite is down more than 40 percent over the last 12 months.

This could get really ugly tonight as this 5 year chart of the Shanghai-SSE indicates how bad shares have slumped:

061416_SHANGHAI_SSE_5YRjgfla

Stay tuned as after dinner, I might have to crank up a Deathburger late night snack for tonight as this could be one huge Chinese fire drill…

 

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