A-share delay is included in MSCI: expected to be included before June next year

Access system needs to be improved

MSCI said that it has conducted extensive and in-depth consultations with global market participants on the inclusion of China A-Shares in the MSCI Emerging Markets Index. International investors affirmed the measures taken by the Chinese authorities to further open up the A-stock market, and pointed out that the issue of real rights ownership has been satisfactorily resolved.

On the other hand, most investors stressed that the progress of the relevant system of QFII quota allocation and capital flow restrictions and the implementation of the new rules for trading suspensions still take some time to observe. Moreover, the QFII monthly capital redemption limit does not exceed the previous year's net asset value of 20%. Investors, including mutual funds, who have a legal obligation to meet customer redemption, still regard this restriction as an important obstacle to investing in A-shares, and believe that this issue must be satisfactorily resolved. Finally, the restrictions on pre-approval of financial products involving A-shares by China Exchange have not been effectively resolved.

In view of this, MSCI will continue to retain the China A-shares list for inclusion in emerging markets in 2017. If China's A-share market access status shows significant positive progress before June 2017, MSCI does not rule out the possibility of including A-shares ahead of the annual market classification review routine.

In addition, MSCI also announced today that it will include the MSCI Pakistan Index as an emerging market in the May 2017 semi-annual index review. The MSCI Peru Index will remain in emerging markets. However, MSCI emphasizes that once the number of constituents of the MSCI Peru Index is lower than the minimum requirement for the minimum number of constituent stocks in emerging markets, Peru will be reclassified as a frontier market.

MSCI announced that the MSCI Argentina Index will be included in its review list for the 2017 market segmentation review that may be included in emerging markets. The MSCI Korea Index will not be included in the 2017 annual market classification review and may be included in the list of developed markets. The main reason is that the new regulations announced by the Korea Financial Services Commission will not take effect until 2017, and the investment resistance caused by the Korean won exchange restrictions and the data use restrictions imposed by the Korea Exchange on financial product development have not been effectively resolved.

A shares affect geometry?

Previously, the mainstream view of the market is still likely to be included in MSCI this year. What impact will this delay have on A-shares?

Xingye’s strategy has previously stated that even if it joins MSCI, its incremental funds for A-shares are limited in the short term. And this time has not joined, or will affect market sentiment in the short term.

There is an institutional view that A shares may have a back pumping in the short term, but the risks are still not fully released and may be relatively concentrated in late June. HY Markets pointed out that (1) credit risk, affecting risk appetite and liquidity expectations, mid-year is the main time period for credit rating adjustment and credit response. (2) The problem of fixed increase and ban and reduction may constitute pressure to restrict the market. Mid-year is also a "small climax." (3) The Fed meeting on interest rates in June may renew concerns about the fluctuation of the RMB exchange rate. (4) The event factors affecting risk appetite such as the European Cup and the Brexit referendum are concentrated in June.

According to the proposal proposed by MSCI, if it passes the review, MSCI will adopt a gradual path to first incorporate A shares into the MSCI index in proportion to the 5% of the free market capitalization of eligible A-shares. In the future, with the further development of China's capital market system. Developed and improved, and finally achieved 100% of A shares into the index. According to the macro measurement of China Merchants, if it is included in the proportion of 5%, the inflow of A-share funds is about 23 billion US dollars, about 150 billion yuan. If 100% is included, the capital inflow will reach a total of 3,970 trillion US dollars, or about 2.6 trillion yuan.

However, the "foreign aid" in the A-share market will only slow down. The actual effective time of the MSCI index adjustment is June 2017, and the adjustment of the active fund will also be gradual. In other words, the short-term decision will bring more long-term effects.

A Hong Kong fund manager told the First Financial Reporter that active funds have more objections to A shares entering MSCI than passive funds. "Because active funds are pursuing performance gains, it is estimated that A shares are still expensive, and passive. Because it is just tracking the index, there is no subjective judgment."

The international index without A shares is incomplete

Of course, the inclusion of A-shares in MSCI is only a matter of time. It is not just that A-shares want to enter MSCI. MSCI also hopes to include A-shares as soon as they meet the criteria.

"China's A-share market is already the world's second largest capital market, and the world's largest emerging market, and the fastest growing market in the world. In theory, an international index without an A-share market is at least incomplete. On June 12, Yan Bin, director of the International Cooperation Department of the China Securities Regulatory Commission, said that attracting investment from international institutional investors is not only for “funds” itself, but also for improving investor structure and increasing rational value investment. Concept.

Coincidentally, Ajay, director of Meisheng Global Asset Management Investment, told reporters that in May last year, before the MSCI “cool” A-shares, FTSE FTSE Index Company had taken the lead in launching the plan to include A-shares in its global transition index. The initial weight of its transition index is 5% (linked to the total amount of RQFII). As A-shares become more open and fully available for investment by international investors, the weight will rise to 32%. “MSCI must also be aware of the will of global investors.”

“The A-shares included in the MSCI Emerging Markets Index are not suspense in the long run,” said Qian Yujun, president and head of UBS China. One reason why the A-shares can be included in the MSCI Emerging Markets Index is that the RMB has become The globally recognized trading currency, and with the acceleration of the opening of the domestic RMB capital market, the RMB is also moving towards the investment currency accepted by global investors.

It is worth noting that according to the First Financial Reporter, as early as June 2015, Brendan Ahern, chief investment officer of Krane Funds Advisors, and about 40 of the largest in the United States Representatives of mutual fund companies gathered at MSCI's conference room in Building 7, World Trade Center, New York. Not long ago, MSCI issued a statement that due to some market access issues still to be resolved, A shares will not be included in its emerging market index.

Then at this meeting, MSCI's research director made a special trip from Switzerland to New York to personally send a clear signal to institutional investors: A-share inclusion in the MSCI Emerging Markets Index is only a matter of time, institutional investors must do this ready.

Reform does not stop

Although the A failed to succeed in MSCI, the pace of opening up China's capital market will not stop.

"China will face an increasingly open market in the future. MSCI is only a head. Whether it is not included, China's reform and opening up will not stop." Yan Bin said that the Chinese market can learn from abroad in many ways. For example, the cooperation between various markets in London is very good. China can learn from its experience in inter-agency cooperation and international peer cooperation.

Jiang Yang, vice chairman of the China Securities Regulatory Commission, also recently made it clear that opening up is an inherent requirement for the reform and development of the capital market and an inevitable choice for enhancing international competitiveness. "China's capital market has gone through more than 20 years of extraordinary development. From scratch, from small to large, one of the most valuable experiences is to steadily promote opening up and open up to promote reform and promote development." Jiang Yang said that Based on the actual situation of the country, deepen the two-way opening of the capital market.

In fact, the A-shares in the process of preparing for MSCI have naturally promoted the reform.

Last year, quota allocation procedures, restrictions on capital flows, and ownership of equity were defined as three stumbling blocks for A-shares entering MSCI. However, the Chinese regulatory authorities have done a lot of work in the past one year, and most of them have been resolved.

First, as far as the investment quota allocation process is concerned, international investors hope to obtain corresponding investment quotas based on their asset size. At the same time, most investors also pointed out that China's quota allocation process can be more stylized, transparent and predictable.

In response to this, the State Administration of Foreign Exchange promulgated the “Regulations on Foreign Exchange Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors” on February 3, 2016: the cancellation of the quota for a single QFII investment shall not exceed US$1 billion, but based on the base amount and The new quota is recalculated; the basic allocation quota for QFII and RQFII (not exceeding US$5 billion) is automatically determined by the asset management scale, and the new quota can be applied to the SAFE without special restrictions.

Previously, the QFII system imposed a single limit of $1 billion, while passive funds must fully replicate the index being tracked (such as the MSCI Emerging Markets Index), and their investment demand for a market is proportional to the size of the fund. It may exceed $1 billion. At the same time, some small investors are also challenging to apply for QFII because they are not eligible for QFII, or they are too small to apply based on their baseline configuration. It can be seen that the current problem has been basically solved.

Second, capital mobility restrictions are also the reason for the last "salvation" failure. CITIC's strategy team pointed out that international investors hope to obtain the daily liquidity of the full range of investment tools including open-end funds, ETFs, etc., improve the capital turnover rate; reduce or eliminate the restrictions on capital lock-in period and capital remittance.

In response to this problem, the latest regulations of the SAFE pointed out that the open-end fund has been allowed to remit funds on a daily basis, and the lock-up period of the principal has been shortened from one year to three months, and the remittance period of the principal has been removed. However, the total amount of funds remitted by QFII per month shall not exceed 20% of the domestic assets at the end of last year. In addition, Shenzhen-Hong Kong Stock Connect is also expected to open during the year. The “Shanghai Stock Connect” daily limit of 13 billion yuan is also expected to expand, effectively meeting the investment needs of international investors.

Third, the CSRC clearly recognizes the concepts of “nominal holders” and “securities equity owners”. "With the active cooperation of China's regulatory authorities, although some systems including anti-competition clauses are still not perfect, it is not expected to have a substantial impact and hindrance to the inclusion of A-shares in MSCI." CITIC Securities 600030, shares pointed out.

In April 2016, MSCI added two new questions to the A-share market in the market consultation: large-scale active suspension and anti-competition clause restrictions. In this regard, the China Securities Regulatory Commission is more responsive. On May 27, 2016, the two major exchanges jointly issued new rules for suspension and resumption, strictly controlled the time limit for suspension of trading, and refined the information disclosure and postponement of resumption of trading procedures during the suspension period to help A shares be included in MSCI. (The first financial reporter Ge Weier also contributed to this article)

Yoga Clothes

Breathability, moisture wicking, and 4-way stretch were the core tenants we designed these clothes around so you can be free in your movements and remain comfortable throughout the entirety of your practice. Our proprietary nylon & polyester blended fabric has been laboratory tested at maximum strength for regular and repeated use so you can wear them confidently knowing they will hold up. Put them to the test and see for yourself!

Women's sportswear, yoga wear, stretchability, breathable

Yangzhou Youju E-commerce Co.,Ltd , https://www.yzxygarments.com