On June 1, A shares will formally be included in the MSCI Emerging Markets Index. According to industry sources, the list of A-share companies that have initially been included in the index will be announced in May. Analysts pointed out that the inclusion of A shares in the MSCI main index will attract international long-term funds to enter the A-share market. The entry of overseas long-term funds will help A-share investment concepts and the maturity of investor groups. After the relevant index constituent stocks are determined, it is expected to usher in incremental fund allocation.
A share internationalization speed
After Morgan Stanley Capital International (Mingyi Company) announced in June 2017 that the A-shares will be included in the major MSCI index, the specific work will be carried out step by step, including the release and change of indices, and implementation plans for index adjustments. Judging from the latest progress, on March 10 this year, Minghao Company announced that it will include A-shares and B-shares in the MSCI Emerging Markets 50 Index, MSCI China 50 Index and MSCI China Foreign Investment starting from the mid-term review of the index in May. Free investment index; On March 14th, MSCI issued 12 New China Indexes, including 3 A-shares, 3 large-caps, 4 medium-caps, and 2 small-caps.
According to industry sources, after the official inclusion of the MSCI Emerging Market Index, A-shares will receive around 100 billion yuan in incremental funds. This is based only on the tracking of MSCI’s passive funds. The current scale of global MSCI index assets exceeds US$10.5 trillion, and 97 of the top 100 global top managers are customers of MSCI Services. If you consider active funds, the size of the capital you attract will be even greater.
According to China International Capital Corporation's estimation, with reference to the open market experience of South Korea and China Taiwan in the medium and long term, it is expected that the amount of overseas capital flowing into the A-share market each year in the next 5-10 years may be in the range of 200-400 billion yuan.
A share's opening to the outside world steadily advanced. A number of agencies said that the recently announced expansion of the Shanghai-Shenzhen-Hong Kong Stock Connect limit and the upcoming A-Shares to be officially included in the MSCI Index are all important landmark events.
Potential opportunities for constituent stocks
According to the selection mechanism announced by Minghe Company in June 2017, based on MSCI's existing China International Index, 222 A-share stocks that are expected to be included in the MSCI Emerging Market Index can be selected. These stocks are mainly concentrated in the financial and consumer sectors. According to the SWS industry rankings, the industries that accounted for a relatively high ratio are: banks accounted for 19.89%, non-bank financials accounted for 16.62%, food and beverages accounted for 8.12%, architectural decoration accounted for 6.19%, electronics accounted for 4.64%, and pharmaceutical biologicals accounted for 4.57%. Real estate accounts for 4.57%.
Minghao’s announcement shows that since June 2017, the potential inclusion of constituent stocks has undergone three index adjustments and component changes in August 2017, November 2017, and February 2018.
CICC said that compared with the existing constituents of the MSCI Emerging Markets Index, the valuation of financial, optional consumption, and some industrial sectors included in the A shares is more attractive and the fundamentals are more stable.
Morgan Stanley’s previous report stated that the mainland stock market is increasingly driven by value and fundamentals. In the long run, the participation of foreign capital will increase. Consumers, energy stocks, certain material stocks and technology stocks serving the domestic market will be favored.
Not only foreign capital participation but also domestic public funds have been gradually laying out MSCI index theme products. For example, an A share international index fund that was closed on April 10 raised more than 4.9 billion yuan in less than a month, making it the largest index fund for the first time this year. ,
Pay attention to value and not forget to grow
Recalling the market performance since mid-February toShanghai 50The performance of the blue-chip sector represented by the index is entangled, and the small-cap growth sector headed by the GEM 50 index is relatively strong.
Several agencies stated that with the A shares formally included in the MSCI Emerging Markets Index, the value of blue-chip will become a re-allocation variety, which will help maintain the A-share investment ecology and philosophy towards a blue-chip value trend.
Another point of view is that although the value stocks will occupy a considerable proportion in the MSCI index, as the values and growth boundaries in the global market are increasingly blurred, the so-called "foreign investment only buys value stocks" is not correct. Foreign investors may also actively explore new stocks with high growth attributes. A number of institutions said that with the A shares formally included in the MSCI Emerging Markets Index, value stocks will be used as a bottom position in the future, while focusing on some high-growth stocks.
On March 14th, MSCI released 12 New China Indexes, including 3 All A Shares, 3 Large Stocks, 4 Medium Stocks, and 2 Small and Medium Stocks, to expand MSCI China A Index Product coverage, and the new MSCI China A-share index will no longer be confined to the previous large-cap Chinese A-shares. Medium-cap listed companies will also be fully covered, and will follow the MSCI Global Marketable Index and Hong Kong Stock Connect qualifications. Standard restrictions.
Insiders pointed out that before the A shares formally included in the MSCI Emerging Market Index, overseas funds may be allocated in advance. The movement of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect to the North is an important reference for tracking the trend of overseas capital allocation. From the perspective of deep stocks and new capital into the north, 43 new stocks have been entered this year, mainly "medium and small". According to statistics from Ping An Securities, at present, the shareholdings of Shenzhen Jitong North Funding Co., Ltd. on GEM grew by 21.73% from the beginning of the year. From this perspective, the value of blue-chip and growth stocks may have opportunities for performance.
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