MSCI decides to include A-shares

Will there be impacts for investors? 

MSCI announced early this morning the decision to include A-shares into its global indices.
  • MSCI will include mainland Chinese stocks into its flagship emerging markets index
  • 222 large cap stocks will be included, beginning in May and August 2018, making up 0.73% of the MSCI Emerging Markets Index
  • The long awaited decision will help institutionalise the market and make the opportunity in A-shares more widely recognized
Hear from Fidelity experts 
“The long-awaited inclusion of A-shares into the MSCI Emerging Markets Index is not a big surprise to market participants. I am positive on such move as it will offer much more investment flexibility in the A-share investment universe. More importantly, the A-share inclusion is very symbolic as it marked a significant enhancement of accessibility of the A-share markets for foreign investors. Global investors are expected to monitor the China markets more closely from now on. Thus, the inclusion will definitely boost market sentiment as well as market liquidity, and more additional capital inflows will go into the A-share markets in the medium to long term. Eventually, the valuation gaps between A-shares and their H-share counterparts are expected to narrow. In general, blue chips and large cap stocks in the A-share markets with stable dividend policies are expected to outperform.The A-share exposure of my two funds has been expanding over the years in light of the improved fundamentals and liquidity of A-share markets over the recent years. I will continue to focus on A-share companies with strong growth prospects and cash flow generating capability"
Raymond Ma, Portfolio Manager, FF-China Consumer Fund
"The announcement by MSCI has been widely expected and is positive news for China’s onshore markets. This is a further step forward in the opening up of China’s capital markets and ensures foreign investors can no longer ignore China’s onshore market. The breadth and depth of China’s onshore market is huge, but still relatively under-researched, which means there are many interesting stock picking opportunities. I would expect that over time the onshore A-share market grows in importance not just in Asia, but globally too."
Dale Nichols, Portfolio Manager FF-Pacific Fund
"The Chinese A-share market has around 4,000 listed stocks, which represents a vast investment opportunity. I have been investing in selected A-share companies over the last three years, as the Stock Connect programmes have considerably improved access to this market. I also have the option to use Fidelity’s US$ 1.2 billion QFII (Qualified Financial Institutional Investor), which is one of the largest quotas available to a foreign buy-side asset manager, to invest in A-shares. Fidelity also has one of the largest research analyst teams based out of Shanghai and Hong Kong that supports my search for the best investment ideas in the domestic Chinese markets. Therefore, the inclusion of A-shares in MSCI China will have a limited impact on my stock picking. I remain committed to my bottom-up mosaic investment approach in China, which is a diverse market. The key remains identifying winners ahead of the market based on a consistent, proven investment approach. Nonetheless, over the longer term, more institutional participation in the domestic market will help develop this market further and reduce volatility."
Teera Chanpongsang, Portfolio Manager FF Emerging Asia

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