On June 1, A shares will be officially included in the MSCI Emerging Markets Index. According to industry news, the list of A-share companies that have been initially 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 into the A-share market. The entry of long-term overseas funds will help the A-share investment philosophy and the maturity of the investor community. After the relevant index constituent stocks are determined, it is expected to usher in incremental capital allocation.
A-share internationalization speed
From June 2017, Morgan Stanley Capital International (Alum) announced that A shares will be included in the MSCI main index, and specific work will be carried out step by step, including index release and change, and index adjustment implementation plans. From the latest progress, on March 10 this year, Alum 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 from the semi-annual review of the May index. Free investment index; on March 14, MSCI released 12 new China indices, including 3 all A-share indices, 3 large-cap stock indexes, 4 mid-cap stock indexes, and 2 small-cap stock indexes.
According to industry insiders, after the official inclusion of the MSCI Emerging Markets Index, A-shares will usher in an incremental fund of around 100 billion yuan. This is based on the measurement of MSCI's passive funds. At present, the global MSCI index is based on assets of more than 10.5 trillion US dollars, and 97 of the top 100 global top-level managers are MSCI service customers. If active funds are taken into account, the size of the funds attracted will be even larger.
According to estimates by CICC, in the medium and long term, with reference to the experience of opening up markets in South Korea and Taiwan, it is estimated that the annual inflow of overseas funds into the A-share market in the next 5-10 years may be between RMB 200 billion and RMB 400 billion.
The opening of the A-share market has steadily advanced. A number of institutions said that the recently announced expansion of the Shanghai-Shenzhen port-to-port limit and the official entry of A-shares into the MSCI index are important landmark events.
Potential opportunities for constituent stocks
According to the selection mechanism announced by Mingsheng in June 2017, based on MSCI's existing International China Index, 222 A-shares that are expected to be included in the MSCI Emerging Markets Index can be screened. These stocks are mainly concentrated in the financial and consumer sectors. According to the ranking of Shenwan's first-class industry, banks accounted for 19.89%, non-bank finance accounted for 16.62%, food and beverage accounted for 8.12%, architectural decoration accounted for 6.19%, electronics accounted for 4.64%, and medical organisms accounted for 4.57%. Real estate accounted for 4.57%.
Alum's announcement shows that since June 2017, potential constituent stocks have experienced 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 in the potential inclusion of A-shares is more attractive and the fundamentals are more stable.
Morgan Stanley’s previous report said that the Chinese mainland stock market is increasingly driven by value and fundamentals. In the long run, foreign participation will rise, and consumers, consumer stocks, certain materials stocks and technology stocks serving the domestic market will be favored.
Not only the participation of foreign capital can be expected, but also the domestic public fund has also laid out the MSCI index theme products. For example, an A-share international index fund that was raised on April 10 has raised more than 4.9 billion yuan in less than one month, making it the largest index fund in the first time this year. ,
Pay attention to value and not forget to grow
Looking back at the market performance since mid-February,SSE 50The index represents the overall performance of the blue-chip sector, while the small-cap growth sector headed by the GEM 50 Index is relatively strong.
A number of institutions said that as A-shares are formally included in the MSCI Emerging Markets Index, value blue-chips will become re-matched varieties, helping to maintain the trend of A-share investment ecology and ideas biased toward value blue chips.
Another point of view is that although the value stocks will occupy a considerable proportion in the MSCI index, as the value and growth boundaries in the global market become increasingly blurred, the so-called "foreign capital only buys value stocks" is not correct. Foreign capital may also actively explore some new stocks with high growth attributes. A number of institutions said that as A-shares are formally included in the MSCI Emerging Markets Index, they will use value stocks as their bottom positions in the future, while focusing on some high-growth stocks.
On March 14, MSCI released 12 new China indices, including 3 all A-share indices, 3 large-cap stock indexes, 4 mid-cap stock indexes, and 2 small-cap stock indexes to expand the MSCI China A-Share Index. Product coverage, and the new MSCI China A-Share Index will no longer be limited to the previous large-capital China A-shares. The mid-market listed companies will also be fully covered and follow the MSCI Global Investable Market Index method and Hong Kong Stock Connect qualification. Standard limit.
Insiders pointed out that overseas funds may be allocated ahead of time before A shares are officially included in the MSCI Emerging Markets Index. The trend of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect Northward funds is an important reference for tracking the allocation of overseas funds. Judging from the new stocks in the Shenzhen Stock Exchange, this year, 43 new stocks have been launched, mainly “small and medium-sized”. According to the statistics of Ping An Securities, the current shareholding of Shenzhen Stock Exchange on the GEM has increased by 21.73% compared with the beginning of the year. From this perspective, value blue chips and growth stocks may have performance opportunities.
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