Chinese A-shares in MSCI Index won’t Hurt India in a Big Way - AxisDirect
Geoff Lewis of Manulife Asset Management
Jun 23, 2017 | Source: ET Now
I do not think it has great implications for other emerging markets. Clearly, there is historic significance for China, but looking at A-share market, I do not think there is going to be a flood of foreign money since brokerage estimate is something like $10 billion flow in the first 12 months. The implementation is going to be in two stages. This is all going to be very gradual although the weight is bigger than 0.5 % as was being canvassed at 0.73 %.
It is very significant. China probably deserves to be included in the index with the small weight, but I do not think it is going to have a big impact on the equity indices in the short term.
We are actually quite positive on the China economy. We are seeing a big improvement in earnings, end of deflation. So MSCI China has done fairly well. In the A-share market itself, majority of the stocks are slightly in the negative territory year to date. The returns have been concentrated in the largecaps, which are the kind of stocks that will be included in the MSCI index. Of course, there is a fairly small pool of funds, which are actually linked to passive funds, ETFs for the for the China market. So it is not going to have a big impact, but create a little bit more positive sentiment towards the Chinese markets, which is what the MSCI inclusion means. I think the market is normalised and is becoming more like another stock market and it cannot do any harm either.