English

By Tang Guhan

The second phase of China’s A shares inclusion in the Morgan Stanley Capital International (MSCI) Index came when the company announced on Tuesday that it would double the constituents' weight in the MSCI China Index to 5 percent from 2.5 percent. Meanwhile, the number of A shares has increased to 236 with 10 newcomers.

The move will come into effect on August 31 2018.

The ten new shares include the China Shenhua Energy Company Ltd., China Unicom, the ZTE Corporation, the software company Yonyou Network, and the consumer electronics giant the TCL Corporation.

Banking, non-banking finance, and medical biotechnology companies are the majority constituents of the 236 shares, among which the first two sectors have 29 and 20 shares respectively while the medical biotechnology companies accounted for 18 shares.

The market capitalization requirement for companies included in the MSCI index was above RMB 16 billion. Moreover, the market capitalizations of 104 out of these 236 shares were in a range of RMB 20 and RMB 50 billion.

Environment, Social Responsibility, and Corporate Governance (ESG) have become another benchmark for the selection of the MSCI regarding A shares, which has been used widely in the evaluation of companies regarding their sustainable development performance.

There are no companies among the 236 that have ever produced negative reports, ESG and the low ranking (C+, C) companies under its management were only 40, according to statistics from the Wind.

There will be around a RMB 39.6 billion capital flow from overseas into the Chinese stock market, said Chinese analysts.

Analysts noted the move has a limited influence in the short-term, but “we need to pay attention to the long-term positive effects in Chinas’ A shares market.”

Which shares are the most favored ones for foreign investors?

Foreign investors have held investments exceeding RMB10 billion in the Kweichow Moutai Company, the Midea Group and Heng Rui Pharmaceuticals and another 14 shares.