Buy China?

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I’ve been saying for a long time that the decision by MSCI (whose indices make up global investment benchmarks adopted by the largest institutional fund managers) to increase their weighting to China is a big deal in terms of institutional fund flows and the future direction of China’s A share market. Just a small percentage point in the MSCI weighting can result in the movement of literally billions of dollars into China’s A share market which will transform China into a screaming ‘Buy’, at least for institutional investors.

According to Bloomberg last week, “MSCI said on Thursday that mainland Chinese stocks, or ‘A shares’, will rise to a weight of 4.1% in the MSCI Emerging Market Index, up from 2.55% currently, as it implements the final step of the weight increase of Chinese shares in its widely-followed emerging markets benchmark, MSCIEF.” This is expected to take effect at market close on Nov. 26.

Most foreign institutional and retail investors are under-exposed to China’s A Shares for lots of understandable historical reasons. What’s your own exposure to China? Is it time to look at this again and/or talk to a professional adviser?


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