MSCI has completed the third and final phase of its 20% partial inclusion of China A-shares in the MSCI indexes, including in the MSCI Emerging Markets index.
At the close of markets on Tuesday (26 November), the MSCI benchmarks will include 472 China A-shares, comprised of 244 large-cap and 228 mid-cap securities.
Following the final phase, the weight of China-A shares in the MSCI ACWI and MSCI Emerging Markets indexes will reach 0.5% and 4%, respectively.
The MSCI China index, which includes China A-shares and offshore listed shares, will include 710 securities representing 4% and 34% of the MSCI ACWI and MSCI Emerging Markets indexes, respectively.
In March this year, MSCI announced it would quadruple the amount of China A-shares in its major benchmarks to 20% in 2019.
MSCI has previously stated that any further inclusion of China A-shares in the MSCI indexes would follow a public consultation and "be reviewed against the progress made towards addressing the remaining market reforms highlighted by international institutional investors".
In its most recent public consultation, MSCI found investors had several concerns before considering further inclusion of China A-shares.
These included access to hedging and derivatives instruments, with international institutional investors requiring liquid on and offshore index futures and options contracts "in order to expand their allocation to China and manage their increased exposure".
International institutional investors also had concerns about the short settlement cycle for China A-shares and the misalignment between onshore China and Stock Connect holidays, while many large fund managers and broker dealers highlighted the "pressing need" for a well-functioning omnibus mechanism in Stock Connect.
Another public consultation will follow once these concerns have been addressed, MSCI said.