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Wait continues for easier access to mainland China shares

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Wait continues for easier access to mainland China shares

June 11
13:32 2015

Want an easier way to invest in  shares of Mainland China stocks? Well, that day is getting closer, but investors will have to wait a little bit longer. Currently, American investors that want to buy China-related shares can only buy Chinese stocks listed in Hong Kong, or shares like Alibaba and Baidu that are listed on U.S. exchanges. But getting exposure to mainland Chinese shares will eventually be easier, when global stock index provider MSCI adds China A-shares to its global stock indexes, including its Emerging Markets Index.

But MSCI decided late yesterday to hold off on adding China shares to its indexes. Investors may have to wait until May 2017, although inclusion could come sooner if key issues are resolved sooner. “May 2017 is the current implementation timeline proposed within the consultation document, subject to the feedback of investors,” said Sebastien Lieblich, global head of index research management for MSCI and one of the senior researchers involved in this decision. “However, the inclusion decision could be brought forward should the highlighted issues be resolved. Typically, they allow a 12-month period between the consultation decision and the implementation. So in theory, the implementation could still come before May 2017 if the highlighted issues are resolved.”

Holding things up are snags related to liquidity, share quotas and ownership issues. China is one of the world’s biggest stock markets. Officials there have been taking steps in recent years to open up its markets to outside investors. For example, last fall’s opening of the Shanghai-Honk Kong stock connect program makes it easier for cross-border buying of listed shares between mainland China and Hong Kong.

When China’s A-shares are eventually included in MSCI’s China stock universe, the number of Chinese stocks investors will have exposure to will jump from 139 to 522, according to MSCI. Once China’s A-shares are added, they would account for a 1.3% stake in MSCI’s Emerging Markets Index and a 4.2% stake in its China Index. The bottom line: American investors will soon have better access to Chinese shares via low-cost index funds.