Charlie Awdry, China equities manager, provides his views on the MSCI’s decision to include China A-shares in their Emerging Markets (EM) and All Country World (ACWI) indices.
The announcement that China A-shares will be included in the MSCI Emerging Markets and MSCI All Country World indices is another symbolic step in the internationalisation of Chinese capital markets. The decision is primarily driven by efforts to improve access and increase foreign participation through the Shanghai-Hong Kong Connect scheme that links the Hong Kong stock market with mainland A-share markets in Shanghai and Shenzhen.
As active equity managers we have been researching and investing in A-share companies for many years and access these shares via ‘Connect’ in our portfolios. While we believe the short-term impact of MSCI’s decision will be limited, more analysis will now be conducted by active investment managers on these A-shares, many of which are not available through foreign markets. These ‘latecomer’ investors may be positively surprised by the quality of some of these Chinese companies and by the strong long-term performance of these shares. We believe valuations of high-quality blue chip A-share companies will likely be supported and underpinned by MSCI’s decision.
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