MSCI starts to lift A Shares weight

Global index compiler MSCI will implement the first step of the weight increase of China A shares in the MSCI Emerging Markets Indexes, according to a MSCI index review released on Monday.

Twenty-six China A shares, 18 of which are ChiNext stocks, will be added to the MSCI China Index and the inclusion factor for 238 existing constituents will be increased from 0.05 to 0.10, the MSCI Equity Indexes May 2019 Index Review said.

China A shares will have an aggregate weight of 5.25 percent and 1.76 percent in the MSCI China and MSCI Emerging Markets Indexes, respectively, according to MSCI.

The weight increase of China A shares in the MSCI Emerging Markets Indexes will be implemented through a three-step process, the report said.

The Foreign Inclusion Factor-adjusted market capitalization of China A shares will be further raised to 0.15 as part of the August 2019 Quarterly Index Review and then to 0.20, together with the inclusion of Mid Cap China A shares, in the final step as part of the November 2019 Semi-Annual Index Review, according to the report.

About 109 companies will be added and three removed from the MSCI China A Onshore Index, which will take place as of the close of May 28, and the three largest additions to this index would be the Wens Foodstuff Group A, Contemporary A and Shenzhen Mindray A, the MSCI said.

In addition, the MSCI China A Onshore Small Cap Index will see 503 stocks added and 49 cut, with most of the new additions coming from newly eligible ChiNext stocks, according to an official statement of MSCI.

MSCI also updated the list of China A Mid Cap securities that may potentially be added to the MSCI China and the MSCI Emerging Markets Indexes as part of the third step of the weight increase to be implemented at the November 2019 Semi-Annual Index Review.

The MSCI announced Feb 28 to increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5 percent to 20 percent in three steps after an extensive global consultation with a large number of international institutional investors, who provided overwhelming support to this proposal.