MSCI says China’s A-shares do not qualify for global indexes

Written by Peng Wang || July 02 2014

On June 11 2014, MSCI Inc. indicated that China’s A-shares will not be included in MSCI’s global index, meanwhile, South Korea and Taiwan will not be considered to upgrade to developed market status.

But A-shares index will be still under review for the potential inclusion in 2015.

The decision is made by the MSCI after they consulted with various banks and funds. There are several reasons for MSCI to exclude A-shares. The primary reason for the exclusion is the quota limitation for qualified foreign institution investors. The quota limitation will make the index hard to replicate. In addition, T+1 in A-shares trading gives investors less leeway when operating on the stock market.

If MSCI will include A-shares into the emerging markets index, MSCI will help the A-shares market to bring in approximately 100 billion RMB. Additionally, more capital will flow once current quotas are removed, as the number of QFIIs is increasing every year (see the chart). According to the People’s Bank of China’s 2013 annual report, Chinese government will scrap quotas when conditions allow.

qfii number china