On June 21, the entire stock market cheered because after four difficult attempts, A-shares were finally officially included in the MSCI index. So, what impact does inclusion in the MSCI index have on A-shares?
Financial Manager will analyze it for you.
The mainstream view in the market is that after A shares are included in MSCI, it will not immediately attract a large amount of capital inflows, but it will be beneficial to the long-term development of the A-share market.
MSCI proposed a narrowing plan in March this year, suggesting that only large-cap stocks that can be traded through the "Shanghai-Hong Kong Stock Connect" and "Shenzhen-Hong Kong Stock Connect" should be included, thereby reducing the number of A-share stocks that may be included. 448 reduced to 169. According to the plan, the recommended weight of A shares in the MSCI China Index will be reduced from 3.7% to 1.7%, and the weight in the MSCI Emerging Markets Index will be reduced from 1% to 0.5%. The weight of Hong Kong stocks and Chinese concept stocks reached 28.1%.
The UBS report pointed out that MSCI’s inclusion of A-shares will be beneficial to its long-term development because it will promote further integration of China’s domestic market with the global capital market. Once included, it is estimated that US$8-10 billion of funds tracking the emerging market index will passively flow into A-shares. But we don’t think it will have a significant impact on the A-share index in the short term, because the daily trading volume of A-shares this year has reached 70 billion U.S. dollars, and the total market value is about 8 trillion U.S. dollars.
Kaiyuan Securities believes that although the incremental funds that A shares can bring after being included in MSCI are only tens of billions, the greater significance lies in whether the international financial market recognizes A shares. Face is more important than bones. . If it is included, it will be good for the underlying blue-chip stocks; if it is rejected, it will be good for small and medium-sized enterprises. The decision lies with MSCI, it is a business decision. It will bring shock to the stock market, but it will not change the trend. Investing in stocks is good for financial stocks, consumer stocks and technology stocks with large market capitalization on the main board.
Goldman Sachs said that MSCI’s opening of the door to China’s A-shares this time will bring a capital flow of US$210 billion to the stock index in the next five years.
Historically, both Taiwan and South Korea experienced a round of stock market gains after joining MSCI. In the medium to long term, it will help increase the proportion of institutional investors. Foreign institutional investors will participate more extensively in A-shares and improve the investor structure. At the same time, it will promote the allocation of global funds to Chinese assets and promote the internationalization of the RMB.