MSCI Indexes Will See Larger A-Shares Weights

MSCI Inc. MSCI, one of the largest providers of indexes used by issuers of exchange traded funds, said Thursday it will increase the weight of China A-shares stocks in its indexes from 5 percent to 20 percent in a three-step process.

By the end of this year, the widely followed MSCI Emerging Markets Index could see its A-shares exposure increase from 0.7 percent to 3.3 percent.

What Happened

Last year, MSCI made the decision to include A-shares — the stocks trading on mainland China exchanges in Shanghai and Shenzhen — in its international benchmarks.

MSCI's decision “follows an extensive global consultation with a large number of international institutional investors, including asset owners, asset managers, broker-dealers and other market participants worldwide,” said MSCI. “The proposal to increase the weight of China A shares garnered overwhelming support from investors.”

Why It's Important

MSCI's decision could spark up to $80 billion of inflows from foreign investors' A-shares stocks, according to Reuters.

Active fund managers that benchmark to MSCI indexes will also need to buy more A-shares as the asset class's profile increases in those indexes.

Several A-shares ETFs trading in New York could benefit from those themes, but perhaps none more than the KraneShares Bosera MSCI China A Share ETF KBA. KBA follows the MSCI China A Inclusion Index, a benchmark specifically designed for the MSCI A-shares inclusion process.

Investors are catching on. In late December 2018, KBA had $304 million in assets under management, a total that has swelled to $405.21 million as of Feb. 27. KBA is home to many of the stocks that are already or will be included in MSCI's A-shares inclusion process.

What's Next

“On completion of this three-step implementation, there will be 253 large- and 168 mid-cap China A shares, including 27 ChiNext shares,on a pro forma basis in the MSCI Emerging Markets Index, representing a weight of 3.3 percent in the pro forma index,” according to MSCI.

As of the end of 2018, about 98 percent of KBA's holdings were large- and mid-cap stocks. KBA is up 24.61 percent this year.

Related Links:

A Marvelous Mobile Payments ETF

An Aging Population ETF Idea

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Long IdeasNewsEmerging MarketsEmerging Market ETFsEventsGlobalTrading IdeasETFs
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!