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MSCI adds China-listed stocks to index in long awaited move

21 June, 2017, 07:06 | Author: Melinda Barton
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For the last three years, the index giant had decided against adding the mainland traded stocks.

"Following the introduction of these major enhancements to the accessibility of the Saudi Arabian equity market, MSCI will be consulting with global institutional investors to gather informed feedback on their practical experience of accessing the Saudi equity markets and in particular on the effectiveness of the recently implemented enhancements", the index provider said in a statement Tuesday.

Meanwhile, Nigeria's status in the MSCI Frontier Markets Index remains under consideration for a "Standalone" re-classification.

In addition, MSCI said Saudi Arabia will be included in its 2018 review for possible inclusion in the emerging markets index, skipping frontier status altogether.

Proshares Ultra MSCI Emerging Markets has a 50 day moving average of 70.59 and a 200 day moving average of 62.54.

"However, the index provider is taking a gradual approach to including Chinese A-shares, perhaps reflecting persistent concerns over structural issues". KATHY LIEN, MANAGING DIRECTOR, BK ASSET MANAGEMENT, NEW YORK "It's definitely going to (put) upward pressure on the yuan".

Boston Fed President Eric Rosengren, however, sounded more hawkish at a conference on Tuesday, where he said low interest rates meant that policy would be "less capable of offsetting negative shocks". It might create a more active (Chinese) central bank to ensure the yuan doesn't appreciate too much. The question was clear: have the Chinese authorities made enough progress on making Chinese equities accessible and investable for global investors?

Fidelity International portfolio manager Raymond Ma added the move has been "long-awaited" but not a big surprise. "It's still an under-represented country based on its market cap relative to other markets around the world".

ProShares Ultra MSCI Emerging Markets (the Fund) seeks daily investment results that correspond to twice (200%) the daily performance of the MSCI Emerging Markets Index (the Index). "For an investors it depends on which index your ETF follows. Hence we think the market impact would be limited". The Fund's investment advisor is ProShare Advisors LLC.

"People really thought $US45 to $US55 was kind of the range of oil, but it is getting weaker and weaker and U.S. producers are getting more and more efficient", said Ken Polcari, director of the NYSE floor division at O'Neil Securities in NY. Yet the step is still a small one. It's going to dramatically change the scope of the weighting over time that we're talking about.

Lieblich said on the press call that the oil producing nation's highly anticipated Saudi Aramco initial public offering "will have absolutely no bearing on our decision to include the Saudi Arabia index into the EM index". They want foreign investment firms with their knowledge and expertise to help institutionalize the markets. Investors often look to pounce on any opportunity in the stock market.

"This is the start of a process through which Chinese equities will achieve a prominence in global investors' portfolios that reflects the size and significance of China's domestic stock market and its economy", Helen Wong, HSBC's Chief Executive of Greater China, said in a statement.


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