There’s little doubt that both China and its equity market have evolved. As economic and market growth continues – albeit under a volatile macro backdrop – China’s growing role is likely to transform the characteristics of the emerging-market asset class and its role in global portfolios. Developing a strategic approach in evaluating allocation to this equity segment is becoming a high priority.
What are the major macro themes affecting China’s economy and markets in 2020 and beyond? What is the outlook for major areas of reforms and market liberalization policies over the next three to five years? How might long-term investors think about China’s role in EM and global allocations? Explore MSCI perspectives on all of these questions and find out more on our China offerings within this page.
Research Insights
Research Insights
China and the Future of Equity Allocations
What does the partial inclusion of China A shares in MSCI indexes mean for global and emerging market equity portfolios?
Commonly held perceptions about China A shares have influenced investors to think factor strategies may not work in the Chinese equity markets. Our research suggests this may be changing.
Amid ongoing U.S.-China trade tension, we have updated our stress test to consider three scenarios for how the situation could unfold — and their impact on currency, bond and equity markets around the world.
Chinese corporate bonds that convert to A shares display equity-like characteristics. But investors who view these securities as equities in disguise are overlooking the complexities of the asset class.
Chinese domestic investors and issuers are moving fast to incorporate ESG considerations in their decision making, prodded by regulatory initiatives to promote ESG practices and disclosure. At the same time, there are shortages of skilled talent, rising consumer expectations around product safety, growing climate awareness and increased expectations for shareholder rights.
As China’s role in emerging markets is rapidly growing and evolving, investors look for ways to assess and analyze ESG investing opportunities in China.
MSCI announced that it will increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps in 2019.
As China’s role in emerging markets is rapidly growing and evolving, investors look for ways to assess and analyze ESG investing opportunities in China.
MSCI announced that it will increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps in 2019.
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MSCI increases the weight of China A Shares in MSCI Indexes
MSCI completes final phase of the weight increase of China A Shares from 5% to 20%
Earlier in the year MSCI had announced its decision to increase the weight of China A shares in the MSCI Indexes using a three-step inclusion process beginning with the May 2019 Semi-Annual Index Review. MSCI increased the inclusion factor of all China A Large Cap shares from 15% to 20% in the MSCI Indexes, notably in the MSCI Emerging Markets Index and the MSCI ACWI Index, coinciding with the recent index review, effective November 27, 2019. Additionally, it also added China A Mid Cap shares, including eligible ChiNext shares, with a 20% inclusion factor to the MSCI Indexes.
MSCI China: Extensive Coverage of the Growing China Equity Market
MSCI China indexes are built on quality-reviewed, enriched datasets backed by 99.96% accuracy levels in index production1. They are calculated using a fully transparent and innovative maintenance methodology with a strong emphasis on enhancing investability and replicability through the use of stringent size and liquidity screens. The indexes aim to represent the performance of a range of opportunity sets of Chinese companies, listed inside and outside China, in the form of different share classes. MSCI Index Methodology.
The flagship China indexes are:
The MSCI China Index is constructed based on the integrated China equity universe included in the MSCI Emerging Markets Index, providing a standardized definition of the China equity opportunity set. The index aims to represent the performance of large- and mid-cap segments with H shares, B shares, red chips, P chips and foreign listings (e.g., ADRs) of Chinese stocks. China A shares will be partially included in this index, making it the de facto index for all of China. It can be used as a China benchmark for investors who use the MSCI ACWI Index or MSCI EM Index as their policy benchmark.
The MSCI China A Index measures large and mid-cap representation across China securities listed on the Shanghai and Shenzhen exchanges. The index covers only those securities that are accessible through "Stock Connect". The index is designed for international investors and is calculated using China A Stock Connect listings based on the offshore RMB exchange rate (CNH).
The MSCI China All Shares Index measures large and mid-cap representation across China A shares, B shares, H shares, Red chips, P chips and foreign listings (e.g. ADRs). The index aims to represent the performance of the opportunity set of China share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. It is based on the concept of the integrated MSCI China equity universe with China A-shares included.
MSCI is committed to delivering innovative solutions that integrate risk and performance analysis for the opportunities and challenges ahead.
Note: - A Shares: China securities incorporated in Mainland China, listed on the Shanghai or Shenzhen Stock Exchange and traded in Renminbi (RMB).
- B Shares: China securities incorporated in China and listed on the Shanghai Stock Exchange (USD) or Shenzhen Stock Exchange (HKD).
- H Shares: China securities incorporated in Mainland China, listed on the Hong Kong Stock Exchange and traded in HK Dollars (HKD). - Red-Chips: China securities of state-owned companies incorporated outside Mainland China, listed on the Hong Kong Stock Exchange (HKD). - P-Chips: China securities of non-government owned companies incorporated outside Mainland China, listed on HK Stock Exchange (HKD). - Overseas-Listed: China securities (including ADRs) listed on foreign exchanges outside of Mainland China and Hong Kong (traded in USD, SGD, KRW etc.)
1 Accuracy calculated internally based on the number of corrections performed over total number of securities or data points covered.