Chinese ADRs Rise to Highest Since July on MSCI Index Inclusion

  • MSCI China, emerging-market gauges now include Alibaba,
  • up 6.6% in past 3 days, Alibaba at highest in a month

U.S.-traded Chinese stocks rose for a third day as the addition of technology companies including Alibaba Group Holding Ltd. and Inc. to some of MSCI Inc.’s largest indexes boosted buying among investors who track the benchmarks.

The Bloomberg China-U.S. Index advanced 0.6 percent to a four-month high in New York on Wednesday, extending its three-day gain to 3.2 percent. American depositary receipts of online retailer have added 6.6 percent to $31.93 since Monday, contributing the most to the increase in the ADR gauge. Alibaba jumped 1.2 percent to $85 on Wednesday, the highest since Nov. 5.

MSCI’s decision to include 14 Chinese ADRs in its indexes took effect after the close of trading on Nov. 30. With an estimated $9.5 trillion of assets benchmarked to New York-based company’s benchmarks, stocks typically rise when they are added to them as investors adjust their portfolios to reflect the changes.

Buying Power

Technology companies from Alibaba to Baidu Inc., China’s biggest search engine, are now listed in gauges including the MSCI China Index and MSCI Emerging Markets Index. For Chinese equities, the move will affect investors with at least $400 billion of holdings and give the country a higher concentration of software companies than any other MSCI gauge worldwide, according to an estimates last month by Goldman Sachs Group Inc.

“It widens the investor base in Chinese equities,” Ankur Patel, chief investment officer at R-Squared Macro Management LLC, said by phone from Birmingham, Alabama on Wednesday. “That additional buying power is certainly going to be supportive of Chinese equities, which you’ve already seen even in the last day or two.”

Technology companies have driven a 35 percent gain in the Bloomberg gauge of Chinese ADRs from this year’s low in September.

“Big names have been strong in the last few days as the inclusion takes place,” said Gregory Lesko, a money manager at Deltec Asset Management LLC. in New York. “There’s going to be some natural buying for people who are underweight. ”

The MSCI China Index gained 0.6 percent on Wednesday, while the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the biggest U.S. exchange-traded fund investing in mainland shares, rose 2.9 percent to $36.87 in New York.

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