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International

MSCI adds sliver of China A shares to emerging markets indexes

MSCI Inc. on Tuesday announced it will add China's Shanghai- and Shenzhen-listed A shares to its global emerging markets benchmark indexes, following three years of delays over market access concerns.

The latest annual review of MSCI's benchmark index constituents adds China A Shares to its MSCI Emerging Markets and MSCI ACWI indexes beginning in June 2018.

MSCI said in a news release announcing the results of its annual review that it plans to add 222 China A-share large-cap stocks, representing about 0.73% of the weight of the MSCI Emerging Markets index.

"International investors have embraced the positive changes in the accessibility of the China A-shares market over the last few years and now all conditions are set for MSCI to proceed with the first step of the inclusion," said Remy Briand, MSCI managing director and chairman of the MSCI index policy committee, in the news release. "The expansion of the Stock Connect has been a game changer for the market opening of China A shares."

China's State Council in August 2016 announced the Shenzhen-Hong Kong Stock Connect program, which was intended to open the door for foreign investors to buy shares in the country's biggest pool of private, small-cap growth companies.

MSCI will also launch the MSCI China A International Large Cap Provisional index on Wednesday, the first of a number of provisional indexes that MSCI says will be part of the MSCI ACWI index series that include China A shares.

Additionally, MSCI announced it will begin a consultation on potentially including the MSCI Saudi Arabia index in the MSCI Emerging Markets index. Rule changes by the Saudi Arabian Capital Market Authority in September 2016 have resulted in an increase in the number of qualified foreign investors entering the Saudi Arabian market, the news release said. MSCI will begin consulting with international institutional investors to gather feedback on the Saudi equity markets.

MSCI also announced it is delaying its decision on potentially reclassifying the MSCI Nigeria index to stand-alone market status until MSCI's semi-annual index review in November.

In addition, MSCI said it is maintaining the MSCI Argentina index on the review list for potentially reclassifying it to emerging markets status as part of the 2018 annual review.