The 4th time was the charm for mainland Chinese stocks which were rejected from MSCI for the past three years. MSCI announced that domestic Chinese stocks will be included in MSCI's global emerging-market index for the first time -- inclusion will begin in 2018. It is largely a symbolic victory for China as they will finally be included in the popular MSCI indices but with just a 0.7% weighting.
It may surprise many investors to learn that stocks from mainland China aren't included in the MSCI stock market indices despite having the Shanghai (#5 largest stock exchange) and Shenzhen (#8) stock exchanges comprise almost $7 trillion in market capitalization. These two exchanges combined are the 2nd biggest after the US and they are also home to many of the small and mid sized company that align with China's consumer and service industries. Note that MSCI has included Chinese companies listed in Hong Kong and ADRs from the US like Alibaba.
MSCI applauded China's efforts to improve accessibility and relax control over index-linked investment products and signaled that it's open to a bigger role for Chinese A shares if China further liberalizes its financial markets. MSCI CEO Henry Fernandez said, "We'd like to expand the universe of shares that are available to international investors.
Are you invested in Chinese stocks? Do you expect to increase or decrease your Chinese exposure?