MSCI's A-share inclusion could affect global investment strategy: expert

BEIJING - The much-anticipated inclusion of China's A-shares into the MSCI Emerging Markets Index could have a long-term impact on global investors' portfolios, according to a senior researcher from global index provider MSCI.

As A-shares offer investors benefits such as diversification and high growth, the inclusion of the shares could drive portfolio managers to put more weight on emerging market shares as a whole, Wei Zhen, director of China research at MSCI, said at the 7th CFA Institute China Investment Conference Wednesday.

Currently, global investors only allocate about 10 percent of their funds to emerging markets, while the rest is invested in the markets of developed countries, according to Wei.

Investors should reconsider their allocation, as increasing the weight of Chinese shares in the emerging market index could change the index's risk and return characteristics.

Historically, A-shares have had very different features from conventional emerging market stocks, including exposure to higher growth and lower liquidity risks.

Their unique characteristics could offer global investors diversification benefits, Wei said.

Starting in June this year, MSCI will include about 236 large-cap A-shares in the emerging markets index, a move that analysts said could bring large inflows of foreign funds to boost the value of A-shares.

The number of stocks to be included is still subject to adjustments, as shares with long-term trading suspensions may be removed, Wei said.