China: Market developments and the impact of MSCI China A shares inclusion

Since 2018, MSCI has been gradually including China A shares in their indices. When MSCI implements its inclusion phase planned for November 2019, China A shares will represent an estimated 3.3% of the MSCI Emerging Markets index.

The China A shares market represents a deep and increasingly accessible opportunity set of stocks in China, as it includes all stocks traded on the Shanghai and Shenzhen Stock Exchanges. China A shares tend to have more government ownership, have higher allocations to “old-economy” sectors, and have been more volatile than other share classes. Investors should continue to monitor China’s efforts to open the China A shares market to foreign investors, and the impact of those efforts on index providers’ allocations to China A shares in global indices. Where investors have the discretion, they should consider allowing active global and emerging markets managers to include China A shares in their mandates.