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 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.
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- Fund Manager Consensus: Hong Kong Needs China More Than Vice Versa (AsianInvestor)
- Naspers’ Tencent Stake Drives the MSCI South Africa Index’s Returns (KraneShares)
- Investors Could Short Hong Kong to Hedge Long Shanghai Positions (BOCOM International)
- Private Equity Firms in Southeast Asia Are Cashing Out Faster (WSJ)
- What Hong Kong Dollar Bond Exposure Means to Investors (The Asset)
- How Huawei Grew and Its Prospects in the US (WSJ)
- Understanding China’s Economic and Market Developments: Managing China’s Transition into Global Benchmarks (FTSE Russell)
- MSCI’s Decision on China’s Onshore Stock Market