MSCI decided against following through with its proposal earlier this year to include an initial sliver of China's domestic A-shares market in its widely tracked emerging markets index, it announced Tuesday in its latest annual market classification review.
The topic will remain on the agenda for the coming year's review.
MSCI also announced that it had decided to remove the MSCI Korea and the MSCI Taiwan indexes from the review list of country indexes proposed for potential reclassification as developed markets, citing lack of progress in addressing accessibility issues in those markets. Both country indexes could return to that review list as soon as “meaningful improvements” are made, according to an MSCI news release.
In a conference call Tuesday, Remy Briand, a managing director and MSCI's global head of index and ESG research, said consultations with institutional investors around the world showed that, despite continued market liberalization, constraints facing offshore investors looking to invest in China's A-shares market remained problematic.
Mr. Briand said in the news release that while institutional investors were “generally supportive” with regard to including A shares in the emerging markets index, the current system requiring quotas to invest in that market remains “too constraining” to move forward for now.
With that market “effectively opening as we speak,” MSCI will keep China A shares “on the list for potential inclusion into emerging markets,” while closely following continued market liberalization there, Mr. Briand said in the news release.