Thursday, June 11, 2015

Effect of MSCI delay China A Share Inclusion - Singapore Stock Broker Andy Yew 938Live Radio interview 10 June 2015

What could possibly account for M-S-C-I's hesitation to include China domestic shares in one of its key benchmarks?

The MSCI said that they will include China A share in their emerging market index AFTER they resolve a few remaining issue with regards to Market accessibility.

The 3 remaining issue are: 
Firstly Quota Allocation
Secondly are the Capital mobility restriction
and finally is daily liquidity

- China currently do not meet M-S-C-I's requirement for market accessibility..Do you think China will improve its market accessibility soon?
Yes, i think the issue can resolve pretty soon, China regulatories has been trying to  resolve the market accessibility issue, the regualtory has announced the launch of Shenzhen Hongkong stock connect which is planned to be second half of 2015 and the possible of increase in Daily quota. 

Currently Foreigners can only buy a net 13 billion yuan of mainland shares each day and there’s an aggregate quota of 300 billion yuan.Once the Shenzhen hongkong connect is completed and with the existing Shanghai Hongkong connect, alot of these capital allocation problem will be resolve as investor can buy an additional of more than 1600 stocks through the shenzhen-hong kong connect program

- Will this also potentially effect to other counters in the MSCI after China A share inclusion? 
China’s eventual inclusion would lead to a rebalancing of global investment, forcing funds to buy shares to match the new index. Currently we see the most beneficial counters will still be the China Counter, and India may face $3.8 bn outflow if China A enters MSCI as they lose their favoritism from the fund managers, we are likely to see capital outflow from India equities to china equities 

- What's your outlook on China A shares?
As the movement in China market is still 80% driven by retail investor, the current market is still very strong, the delay of MSCI inclusion does not really affect the market in the short term, hence Shanghai composite close flat today above 5100. However in the longer term outlook, the inclusion China Shares to the MSCI is just the matter of time, and possibly happen before 2016, it will definitely boost the confident of global investor to invest in china. We remain very bullish in China A share in a longer term.