The country obviously has growing stature in the global economy, while A-shares have been around for 25 years.
The index provider announced that after four reviews, beginning in 2013, it will start to add 222 large cap China A-stocks to its Emerging Markets Index from June next year.
The development opens China up to international investors by allowing them to access companies trading on Chinese stock exchanges, but it will take time to reap the full benefits of the move.
China will subsequently only represent 0.73% of the $1.5trn index, 0.8% of MSCI Asia Ex-Japan, 2.6% of MSCI China and less than 0.1% of the MSCI All Country World Index.
Initial inflow into the market is expected to be in the region of $1.5bn.
The overall weight of China in the EM index is anticipated to reach about 9% as the inclusion factor is increased from the initial 5% to 100%.
But even then China will still remain the most under-represented country in the index compared to its economic significance.
This is hardly a gleaming endorsement for A shares: the world’s second-largest stock market with a market capitalisation of $7.5trn.
Including A-shares in the index undoubtedly has clear benefits for asset owners, but why has it taken so long and why such a low initial representation for a country with the second-largest stock market in the world?
