Chinese shares have finally been given the go-ahead to enter the MSCI index, a key victory for a Chinese government who have been working for several years to open its markets to foreign capital.
China has been rejected from the MSCI, the world’s biggest stock index provider, for the last three years; however on Wednesday it was confirmed that 222 of China’s so-called “A” shares would be added to the Emerging Markets Index.
MSCI has been in discussions with Chinese regulators and global investors for the past four years over whether to add yuan-denominated shares, but had continued to exclude them due to the restricted access to China’s equity markets.
“Given the size and importance of China as an economic superpower, I think this is a historic moment,” Kevin Anderson, senior managing director of State Street Global Advisors and head of investments in the Asia Pacific region told Reuters.
“It’s a long-awaited and much-debated decision in the past, and I think it’s more than symbolic as it will create additional flow of capital and potentially a new segment of institutional investors in the China market.”
Investors are often wary of investing in China due to its fast growth rate giving the markets a boom-and-bust nature, as well as strong government intervention.
Chinese markets had a volatile day on the back of the news, with Shanghai shares opening just 0.3 percent higher before falling and rallying again to end the day up 0.5 percent.