MSCI to significantly increase weight of China A-shares in global indexes

A stock exchange hall in the Chinese city of Hangzhou. Chinese markets are dominated by mom-and-pop investors

A stock exchange hall in the Chinese city of Hangzhou. Chinese markets are dominated by mom-and-pop investors

The US-based MSCI, which past year added 236 China-listed large-cap stocks to its Emerging Markets Index for the first time, said in an announcement late Thursday it would quadruple those shares' weighting in three stages by November.

On completion of the three-step implementation, the weighting of Chinese stocks in the MSCI Emerging Market Index will jump to 3.3 percent, from roughly 0.7 percent now.

"Although more and more investors, both institutional and retail, are considering strategic allocations to China, they remain underweight despite moves to open capital markets and make investing in China easier".

China's CSI300 index rose 2.2 percent to lift the gauge of blue chips 6.5 percent for the week, its best weekly performance since November 2015. NY time, while the Nasdaq Composite Index gained 0.8 percent and the Dow Jones Industrial Average climbed 0.4 percent.

Inclusion on the benchmarks is expected to bring in billions of dollars in additional foreign investment since institutional funds buy shares of the China-listed companies - known as "A shares" - to match their portfolios to MSCI's lists.

"While schemes such as Hong Kong-Shanghai Stock Connect have allowed foreign investors to play a more prominent role in the A-share market, their participation is still very low".

When MSCI Inc made a decision to expand the weighting of China equities in its benchmark indices, it also announced it would add ChiNext Index members for the first time, something MSCI said it would consider a year ago.

China-focused ETFs listed in the US jumped Friday, with the Xtrackers Harvest CSI 300 China A-Shares ETF adding 2.4 percent as of 11:55 a.m.in NY.

Global index compiler MSCI announced Thursday it will increase the inclusion factor of China A-Shares from 5 percent to 20 percent in three steps.

The modest inflation lends support to the Federal Reserve's pledge to be patient on hiking US interest rates, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

The benchmark Shanghai Composite Index was up almost 18 per cent this year as of Thursday's close.

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The 100-member gauge of mostly small-cap and technology stocks in the southern tech hub of Shenzhen is notoriously turbulent, and often rises and falls depending on the availability of liquidity in China's markets. It jumped a record 25 per cent last month.

Spot gold fell 0.3 percent on the stronger dollar, to $1,309.35 per ounce.

Sydney rose 0.4 percent, Singapore and Wellington each edged up 0.3 percent and Jakarta put on 0.9 percent.

South Korea's financial markets had been closed on Friday for a public holiday.

Traders brushed off a negative lead from Wall Street that came after data showed the U.S. economy grew in the fourth quarter at a much slower pace than the previous three months but was much better than forecasts.

Last year's introduction of A shares had whetted foreign "appetite" for Chinese equities, said Remy Briand, MSCI's managing director.

The news soothed worries on trading floors after US Trade Representative Robert Lighthizer appeared to temper expectations for an agreement.

Mixed messages on trade combined with the collapse of the summit between Trump and North Korean leader Kim Jong Un on denuclearization, and data from China showing slowing factory activity to pressure USA stocks.

All sectoral indices dropped in Manila, with the mining and oil index down the most by 1.56 percent.

More than 1.65 billion issues were traded valued at P8.47 billion.

Losers led winners, 114 to 64, while 60 issues were unchanged.

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