By Keith Bradsher & Alexandra Stevenson
Chinese stocks will join an important global benchmark in a decision that opens the door for foreign money to flow into the China’s markets.
The global stock index provider MSCI announced recently that the stocks of companies that trade in China’s stock markets would be included in its influential emerging markets benchmark. For several years, money managers have anticipated the move, which will make it easier to invest in China.
The MSCI decision represents a mostly symbolic victory for China. The Chinese government had lobbied MSCI for years to include in its indexes the so-called A shares traded on the Shanghai and Shenzhen stock markets. MSCI has added 222 large capitalization stocks on both exchanges.
Many investors measure the performance of money managers, like mutual fund and hedge fund managers, against MSCI indexes. That puts pressure on active managers to buy the shares in the index, and then add or subtract a few stocks in an effort to beat the index.
China’s inclusion, even on a limited scale, means that money managers will find the indexes more attractive. Many investors have also gravitated toward index funds that try to match the indexes directly, by buying all or nearly all the stocks in them.
The Chinese government long sought MSCI inclusion because it could help establish Shanghai and Shenzhen as global financial centers.
(Ailin Tang contributed research from Shanghai.)
© 2017 The New York Times