MSCI Still Monitoring China A Shares After ‘Positive’ Signs

MSCI Inc. said it is continuing to monitor China’s mainland stock market for potential inclusion in its global indexes and has seen some positive developments.

The start of the Shenzhen-Hong Kong Connect, a stock-trading link that will give foreign traders broader access to China’s $6.5 trillion market, could help address repatriation issues international investors face, the index provider said in a statement Thursday. MSCI said it has seen a “marginal” drop in the number of suspended mainland shares after Shanghai and Shenzhen exchanges released stock suspension rules in late May.

The announcement comes after MSCI in June cited accessibility issues among the reasons its decided not to include mainland-listed stocks, or A-shares, in its global benchmark indexes, a blow to government efforts to raise the profile of the country’s markets and increase the international importance of the yuan. The results of the next index review are expected in June 2017.

MSCI “doesn’t rule out a potential off-cycle announcement should significant positive developments occur,” the index provider said in the statement. “More time is still required to properly assess the effectiveness of the new policies.”

Chinese authorities’ recent steps to open up the market may mitigate two of the three concerns MSCI cited when it denying A-share inclusion in its benchmark indexes: a monthly repatriation limit of 20 percent and a high number of stock suspensions. Officials haven’t yet addressed an issue of pre-approval restrictions on launching financial products, the index provider said.

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