MSCI adding mainland Chinese A shares to key emerging markets index on fourth review

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An investor smiles during his observing stock market at an stock exchange in Fuyang, Anhui province of China.

In a long awaited decision, MSCI said Tuesday it plans to add mainland Chinese shares to its benchmark Emerging Markets Index.

The index giant said it will add 222 China A Large Cap stocks on a gradual basis.

“International investors have embraced the positive changes in the accessibility of the China A shares market over the last few years and now all conditions are set for MSCI to proceed with the first step of the inclusion,” Remy Briand, MSCI Managing Director and Chairman of the MSCI Index Policy Committee, said in a release.

“The expansion of Stock Connect has been a game changer for the market opening of China A shares,” he said, referring to a program giving foreign investors access to the Shanghai and Shenzhen stock markets through Hong Kong.

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MSCI’s benchmark Emerging Markets Index is tracked by an estimated $1.6 trillion in assets, as of the end of June last year. The review is the fourth straight year MSCI has considered adding the mainland-traded stocks, known as A shares in China.

Their addition could be a big boost to the world’s second-largest stock market, which has until now drawn limited foreign investor interest because of high volatility, frequent trading halts and limited foreign investor access to the Shanghai and Shenzhen stock markets.

The Shanghai composite is up 1.2 percent year-to-date, in contrast to gains of more than 18 percent for the iShares MSCI Emerging Markets ETF (EEM). The S&P 500 is up more than 9 percent this year at record highs.