Be Wary of the MSCI China Inclusion Hype (WSJ)

MSCI, one of the biggest index compilers, is expected to make a decision later this month on whether to include shares listed on China’s domestic exchanges (known as A shares); but the Wall Street Journal’s Heard on the Street blog recently had a post saying investors should be wary of the hype because:

The initial impact would be very small even if MSCI decided to pull the trigger. Inclusion would still be a year away and even then, initially the weighting would only be 5% of a full inclusion. Estimated inflow linked to the initial inclusion will be less than one day of average turnover.

And:

And then there’s the issue of what investors would be getting themselves into. China’s A shares trade at a 35% premium to their Hong Kong-listed shares for dual-listed companies. China’s biggest oil firm, PetroChina, for example, is 63% more expensive in Shanghai than in Hong Kong. Hong Kong and U.S.-listed Chinese stocks are already included in MSCI indexes.

Heard on the Street went on to mention China’s “checkered regulatory record, highlighted last summer by a bumbling market intervention.”

To read the whole post, China and MSCI: Index Inclusion Creates Illusion of Grandeur, go to the Heard on the Street blog on the website of the Wall Street Journal. In addition, check out our China closed-end fund list and China ETF list pages.

Be Wary of the MSCI China Inclusion Hype (WSJ)

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