China’s A-share MSCI milestone is more symbolism than substance
There will be a time when Chinese A-shares play a huge role in global emerging market (EM) portfolios, but Wednesday’s news does not mark that moment.
Wednesday’s decision by MSCI to include Chinese domestic stocks in its global benchmark equity index is a big deal, but not quite as big as it looks.
Symbolically, it’s enormous. After years of discussion and disappointment, next year A-shares will be part of the most powerful EM index in the world, one which is tracked by about $1.6 trillion of money.
People have had exposure to Chinese stocks for years through listings in Hong Kong and even New York, but this is the real thing: China in its unvarnished domestic glory, Shanghai and Shenzhen-listed stocks, collectively the second-largest equity market in the world.
However, it won’t make a huge difference to asset managers in practice, or not directly, anyway.