MSCI further delays China A shares inclusion

MSCI further delays China A shares inclusion

MSCI has again delayed the inclusion of China A shares in its Emerging Markets index, citing investor concern about certain Chinese government changes.

In a statement to the market, the global indexing firm's managing director Sebastien Lieblich cited investor concern about changes to its Qualified Foreign Institutional Investor (QFII) quote allocation and capital mobility policies.

MSCI's 2016 consultation on the inclusion of China A shares also uncovered concerns by investors about the effectiveness of the Chinese government's new trading suspension policies, Mr Lieblich said.

"In addition, the 20 per cent monthly repatriation limit remains a significant hurdle for investors, and local exchanges' pre-approval restrictions on launching financial products remain unaddressed," he said.

"As a result of these concerns, MSCI will retain the China A shares inclusion proposal as part of our 2017 Market Classification Review. We don't rule out a potential off-cycle announcement should further significant positive developments occur ahead of June 2017."

An HSBC note to investors on the announcement, titled A-shares and MSCI: The missed opportunity, admitted the bank had "underestimated the resistance of the global investment community on the A share inclusion issue".

"We agree there is room for improvement in the regulatory environment and in corporate governance in the A-share market; however, we believe it is moving in the right direction," HSBC said.

"We still think inclusion is probable (possibly by year-end), and cite historical precedent for support."

MSCI further delays China A shares inclusion
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