China's MSCI Inclusion: A Game Changer?
45sThe announcement of China's A-share inclusion into MSCI is a major financial event with global implications, sparking curiosity and debate.
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China's A-share inclusion into the MSCI index marks a significant milestone in opening its financial sector to global investors, making the world's second-largest market more accessible. This development is expected to have ripple effects on other emerging markets, particularly the Philippines, as foreign funds may shift allocations toward China.
Chapters
[00:00]
China's A-share inclusion into MSCI
China's A-share inclusion into the MSCI is a significant step for China and its goal of opening up further the nation's financial sector.
[00:14]
Authorities' actions and institutional support
Authorities have taken things forward with the Stock Connect and institutional investors have shown support with the removal of the pre-approval requirement.
[00:27]
Recognition and market size
The recognition allows the world's second-largest market to become accessible to the world's investors, with its $6.8 trillion onshore market accounting for 9% of global stock value.
[00:53]
Impact on the Philippines
Ricky Loraez of Strategic Equities wasn't surprised as some foreign money went out of the Philippines days before, possibly heading to China, which is still growing despite a slowdown in GDP growth.
[01:21]
Potential underweighting of Philippine shares
Migs Lopez of AB Capital says all shares, including those listed in the Philippines, will highly likely get underweighted, especially as foreign funds have been bulking up on the Philippines due to infrastructure build and tax reform progress.
[01:33]
China's path to MSCI inclusion
It took four tries before China got the MSCI's nod. China has since moved to connect its markets in Shanghai and Shenzhen with that of Hong Kong's, part of the country's reforms towards global integration.
[01:46]
Reaction and competition for foreign money
While reaction had been initially muted among Chinese shares, some market watchers in Manila warn of fiercer competition ahead for foreign money.
China's MSCI inclusion is a landmark step for its financial integration, but it also signals increased competition for foreign investment among emerging markets, particularly affecting the Philippines.
Mentioned in this Video
💡 Key Takeaways
📊
China's market becomes accessible
This is a historic milestone for global investors, opening the world's second-largest market.
00:27
💡
Philippines faces capital outflow risk
Highlights the competitive dynamics among emerging markets for foreign investment.
00:53
⚖️
China's persistence pays off
Shows the importance of reforms and persistence in achieving global integration.
01:33Full Transcript
[00:00] China's A-share inclusion into the MSCI is a significant step for China and its goal of opening up further the nation's financial sector. Jingyi Pan is market strategist at IG Asia in Singapore.
[00:14] What the authorities have done is really take things forward with the Stock Connect and also I think institutional investors have shown their support with the removal of the pre-approval requirement.
[00:27] So I think in that sense, it's really quite a recognition of this debt. The recognition now allows the world's second-largest market to become accessible to the world's investors,
[00:39] all of its $6.8 trillion onshore market accounting for 9% of global stock value. Reason why Ricky Loraez of Strategic Equities wasn't surprised as some foreign money went out of the Philippines days before.
[00:53] Could well be that China is going to be one of the destinations, considering that China is the slowdown in the GDP growth rate in China. It already largely been discounted and it is still growing and it is a regional powerhouse So you can argue with size that is still growing albeit at a lower rate It a new headwind for Philippine markets says AB Capital investment manager Migs Lopez
[01:21] He tells ANC all shares, including those listed in the Philippines, will highly likely get underweighted. And that's coming at a time foreign funds have been bulking up on the Philippines as
[01:33] the infrastructure build gets going. And amid progress in the tax reform plans under the Duterte administration. It took four tries before China got the MSCI's nod. China has since moved
[01:46] to connect its markets in Shanghai and Shenzhen with that of Hong Kong's, part of the country's reforms towards global integration. While reaction had been initially muted among Chinese shares, some market watchers in Manila warn of fiercer competition ahead for foreign money.