MSCI’s China A-share index inclusion is a game changerRussel Chesler, Director, Investments & Portfolio Strategy20 June 2017
MSCI’s announcement today that it will include China A-Shares to its indices will increase demand for them. VanEck Vectors ChinaAMC CSI 300 ETF (ASX: CETF) is the only A-share ETF on ASX. With CETF you can get in ahead of the big end of town which will follow index providers as they continue to increase their allocation to China A-shares
This morning the world’s largest index provider, MSCI confirmed that it is adding China A-shares into its emerging markets and all country indices. MSCI announced that China A-shares will make up approximately 0.73% of its emerging markets index, at a 5% partial inclusion factor, increasing over time. The decision is the result of China’s capital markets being freed up recognising the Chinese government has made significant steps to make A-shares more accessible for international investors.
Today’s announcement has the potential to create an opportunity for savvy investors.
The way institutional investors construct their portfolios is to hold positions similar to recognised indices, such as MSCI’s, otherwise they are taking a big risk. If markets go against them and they drastically underperform the index, they will be seen as incompetent. Better to be just above or just below the index.
Putting two and two together, the previous difficulty in getting hold of China A-shares and their exclusion from indices despite the market's size, means A-shares are under-represented in worldwide indices and institutional portfolios. Indices will increase their weightings to China A-shares to be more representative of the Chinese market’s size and institutional investors will follow.
CETF gives investors a unique opportunity to get into China A-shares ahead of this institutional wave – a chance to get in before the new institutional demand drives up the prices.
VanEck has the only China A-shares ETF available on ASX through ASX code ‘CETF’.
With CETF you can get in ahead of the big end of town which will follow from May 2018 when MSCI include China A-shares in its world indices.
CETF provides pure China A-share exposure, giving investors the opportunity to access the 300 largest and most liquid A-shares without any repatriation restrictions.
For more information on CETF click here.
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