In the past two years, A-share has completed a magnificent first stage of internationalization. Since 2018, MSCI, FTSE Russell, S & P Dow Jones and other international indexes have started to include a shares, and the proportion of the index has gradually increased.
MSCI gradually increased the proportion of A-share large cap stocks to 5%, 10%, 15% and 20% from June to September, 2018, may, August and November 2019. The tracking capital scale of MSCI global index and emerging market index is US $1.6 trillion and US $3.2 trillion respectively. According to the proportion of a shares in the two indexes, the agency expects that the four-step expansion of MSCI will bring about US $16.2 billion, US $18.3 billion, US $15.9 billion and us $27.7 billion capital incremental potential to the A-share market respectively.
There are also voices of concern in the market: will slowing down the process of internationalization of a shares also affect the inflow scale and willingness of foreign capital?
Cao Gang, Ze Haos investment partner, also told reporters: whether its the Korean market or the Taiwan market, the inflow of foreign capital is not a pulse inflow in the year when MSCIs proportion is increased, but there is a continuous inflow of capital every year during this period. After the proportion is increased to 100%, foreign investment will continue to flow in for 2-3 years. It can be determined that it is a relatively certain trend in recent years for overseas funds to increase their positions in a shares, and the incremental foreign investment can still be expected.
MSCI has repeatedly proposed that at present, the proportion of a shares in MSCI continues to increase, mainly facing four constraints, namely, insufficient hedging tools, short stock fund settlement cycle, holiday risk in interconnection, and gradual transition to comprehensive trading account mechanism.
The above four problems can be divided into two major aspects to analyze. First, the problem of hedging tools. The richness of risk management tools in domestic market is an important chip and also an important reason for foreign investors to hesitate.
Corresponding to the overseas market, at present, there are three major stock index futures, Shanghai Stock Exchange 50ETF options and Shanghai Shenzhen 300etf options to be launched in domestic A-share derivatives. However, compared with the overseas market, the domestic exchange currently provides investors with A-share derivatives which are not rich enough to meet the needs of investor risk management as a whole.
Zhang Xia, chief analyst of China Merchants Securities strategy research, summed up the last three problems as the operation and management risks brought by different trading mechanisms or systems at home and abroad. To solve these problems requires a relatively long-term market infrastructure, and it is difficult to achieve adjustment in the short term, which is also a process for a shares to gradually integrate with the international market, he said. Any of the above improvements will help to increase the weight of a shares in the international market index.
However, looking at other reference markets, it will take a while for a share to achieve 100% Inclusion in the major international indexes, not overnight.
Based on the experience of South Korea, we can look forward to the pace of Chinas A-share being included in various international indexes in the future. It took six years for South Korean stock market to be fully included in MSCI, slow first and then fast. However, compared with South Korea, Chinas economy is huge, and Chinas financial opening up is accelerating. Considering the important influence of A-share on the international index, the speed of the international indexs inclusion of Chinas A-share may exceed that of South Korea. According to Zhou Zipeng, an analyst at Everbright Securities.
Source: responsible editor of 21st century economic report: Yang Bin_ NF4368