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Investors Cool on A-Shares Possible Inclusion in EM Index


Some international investors are not enthused by the possibility of index provider MSCI (MSCI) adding China’s A-shares to the MSCI Emerging Markets Index.

Templeton’s Mark Mobius said in a Bloomberg Television earlier this month that the lack of accessibility of A-shares makes the effort to possibly add those stocks to the MSCI Emerging Markets Index one that lacks sense.

“Fidelity Worldwide Investment calls it crazy. Schroder Investment Management Ltd. says it’s terrible. Societe Generale SA’s private-banking unit dubs it unfair,” reports Weiyi Lim for Bloomberg.

Access to China’s A-shares, the equities traded in Shanghai and Shenzhen, has increased in recent months with the debut of some exchange traded funds offering physical access to A-shares. The db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) launched last November, becoming the first U.S.-listed ETF to offer physical access to China’s A-shares. ASHR has proven to be one of the more successful ETFs that debuted last year and currently has $146.2 million in assets under management. [These New ETFs Rapidly Gained Assets]

The KraneShares Bosera MSCI China A (KBA) launched in early March and the Market Vectors ChinaAMC A-Share ETF (PEK) , the oldest A-shares ETF, has converted from a basket of derivatives to holding physical equities, but despite the increased access at the ETF level, investors are concerned about the possibility of A-shares entering one of the marquee emerging markets indices. [Hard to Ignore China A-Shares ETFs]

MSCI’s inclusion of A-shares in the emerging markets index would be gradual, starting with 5% in 2015, according to the index provider. That would boost China’s weight in the index to 19.9% from the current level of 17.7% and if the country decides to fully liberalize its financial markets, it could account for 27.7% of the MSCI Emerging Markets Index. [Move to EM Index Could Lift A-Shares ETFs]

The MSCI Emerging Markets Index, to which $1.3 trillion in global assets are benchmarked, is the underlying index for the iShares MSCI Emerging Markets ETF (EEM) . EEM is the second-largest emerging markets ETF by assets.

Earlier this month it was reported that Chinese regulators are mulling plans to permit cross-market investing between Shanghai and Hong Kong, but some investors view that effort as not doing enough to enhance the accessibility of A-shares equities. [Cross Market Plans Could Lift A-Shares ETFs]

db X-trackers Harvest CSI 300 China A-Shares Fund