China A-shares on MSCI a positive
The partial inclusion of China A-shares into MSCI's emerging markets indices until 2017 might benefit Australian and global investors as it will help attract greater flows to the Chinese markets, AMP Capital believe.
The firm said it was also a recognition of ongoing reform efforts in China following MSCI's announcement that it had delayed the inclusion of China A-shares in its emerging markets indices.
AMP Capital said that the future inclusion of A-shares would be particularly encouraging for the institutional investors as it would bring accessibility to the Chinese market.
However, it warned that full inclusion of China A-shares into MSCI's indices was still subject to the abolishment of China's quota system, liberalisation of capital mobility restrictions, and alignment of international accessibility standards.
The firm also said it would be a "gradual process" depending on the future pace at which the country would be developing.
AMP Capital head of Asian equities, Patrick Ho, said he was pleased that MSCI recognised the clear improvements that had been made with regard to the accessibility of the China A-share market for global investors.
"When China A-shares are eventually included in MSCI's indices, Australian investors will benefit because it will create liquidity and it should reduce volatility. The moves undertaken by China to improve accessibility have also made the China A-share market more efficient. These efforts have already contributed to the positive development of the market, making it more attractive to international investors, and will continue to do so," he added.
China A-shares are expected to remain on MSCI's 2017 review list for partial inclusion but MSCI may bring forward a decision before the scheduled timeframe of mid-2017.
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