Markets wait for decision to add Chinese stock markets to emerging market index
June 20 may signal good fortune for China’s economy. MSCI, an American investment research firm, will announce whether to include 169 of China’s A-Share stocks in its emerging market index.
As China’s economy expands, MSCI inclusion could lead to increased economic diversification and global influence. China has been rejected three times in the past due to foreign firms’ exclusion from trading and severe capital controls. Beijing’s new cybersecurity law further complicates matters, as foreigners’ data rights are left unclear.
Entry into the emerging market index predicts trillions in investment; long-term, China could become the index’s biggest player. Of the 169 companies, financials and industrials are the most prevalent, along with increased presence of consumer staples and real estate.
Inclusion may overall bring a more robust economy. Still, whether China will pass the openness test remains unanswered.