Caixin
Oct 11, 2019 05:11 AM
FINANCE

MSCI to Add STAR Market Shares to Global Indexes

China launched the new trading venue as a testing ground for several major stock-market reform measures. Photo: VCG
China launched the new trading venue as a testing ground for several major stock-market reform measures. Photo: VCG

Global index compiler MSCI Inc. said it plans to add stocks on China’s newly launched high-tech board to its indexes from next month, expanding Chinese securities’ exposure to global investors.

Beginning in November, equity securities on China’s Nasdaq-style Sci-Tech Innovation Board of the Shanghai Stock Exchange, also known as the STAR Market, will be eligible for inclusion in the MSCI Global Investable Market Indexes (GIMI), MSCI said Thursday in a statement.

The move could introduce more liquidity into China’s equity markets and offer broader access for global investors to the world’s second-largest economy. Chinese authorities have stepped up efforts to open up the financial sector and encourage steady inflows of global funds into domestic markets, in part to help balance pressures on the yuan after an exodus of capital in 2015.

MSCI officially included Chinese A-shares in its widely tracked indexes for the first time in June 2018, while rivals such as FTSE Russell and S&P have also stepped up index inclusion of A-shares.

STAR Market stocks will be included in the MSCI China Indexes, the MSCI China All Shares and the MSCI China A Onshore Indexes and their derived indexes if they meet requirements of the MSCI GIMI Methodology and the eligibility of the stock connect programs linking the mainland markets and Hong Kong, MSCI said.

The new inclusion is a separate move from MSCI’s ongoing plan to increase the weighting of Chinese shares in MSCI's global indexes, the company said.

According to a February announcement, MSCI would carry out a three-phase expansion of A-share inclusion — in May, August and November — under which the weighting of mainland shares would rise to 20% from 5% at the end of 2018 and the weighting of shares in the Emerging Markets Indexes to 3.3% from 0.7%.

MSCI said in July it started assessing the potential inclusion of STAR Market stocks, shortly after the launch of the new high-tech board. China created the new trading venue as a testing ground for several major stock-market reform measures including a registration-based listing system that shortens the period and improves transparency for applicants compared with other markets in the country. A total of 33 companies, mainly high-tech focused, are trading on the new board.

Bourses in Shanghai, Shenzhen and Hong Kong also reached agreement in late July to push forward the inclusion of STAR Market stocks in the Stock Connect programs, which allow investors in Hong Kong and on the mainland to trade on each other’s markets. But it is unclear when the inclusion will start.

Contact reporter Han Wei (weihan@caixin.com)

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