[00:00] This time last year, when MSCI considered including mainland Chinese stocks in its index
[00:12] universe, 90 stocks in the blue-chip CSI 300 had more than doubled in value in that year to date. This week markets face the same decision. The debate is no less heated, but at least the market is far more tepid.
[00:26] 20 blue chips in China have made any headway at all this year. Whether or not MSCI gives China the nod is really beside the point, which is that it is already time to start considering China to be a global standalone market. As one fund manager describes it, putting China in with the other
[00:44] emerging markets is like looking at an elephant dancing with a bunch of deer and rabbits. Now the elephant already makes up more than a quarter of MSCI's flagship EM index. This
[00:56] This is via stocks listed in Hong Kong and New York. Relative bunnies then include Brazil and Mexico at just 6.5% and 4.5%. Over time, the assumption is that A-shares will be given a bigger weighting,
[01:09] reaching as much as 39 of MSCI EM index Now that index is followed by an estimated trillion of funds Such a heavy China weighting would risk putting the index in a similar position to MSCI All Country World
[01:25] Index. There the US accounts for 53%. Now in theory both indices are good benchmarks but in reality few follow the ACWI because it is so heavily weighted to a single market. The benefit of
[01:39] already cheating China as not just another EM is the extra resources investors would devote to understanding it better. One Asia head of investment reports colleagues in the US and Europe are still routinely shocked when they see just how poor disclosures are from mainland companies and how
[01:56] little English language information there is. Now the only way that would improve or change is if more people demand it. I'd bet few fund managers could name those 20 gainers in the CSI 300 from
[02:08] this year compared with, say, the S&P 500 leaderboard, at least without reverting to a Bloomberg terminal. China's gradual opening up is one of the few identifiable long-term market trends out there, and getting ahead of that means getting to grips with those
[02:23] companies now.