MSCI increases China A Shares’ dominance in emerging market indices

Leading index provider MSCI has announced 14 changes to its range of indices, being implemented by 28 May. These changes include the inclusion of Saudi Arabia and Argentina in emerging markets, the addition and removal of securities from a range of indices and weight increase of China A Shares in emerging markets.

Through a three-step process of increasing inclusion factors, MSCI is adding 26 China A Shares to the MSCI China Index resulting in an updated aggregate weight of 5.25%. Furthermore, 1.76% of the MSCI Emerging Markets indices will now be comprised of China A Shares.

The inclusion factor will be increased from 0.05 to 0.10 by the end of May. Further increases will be implemented to 0.15 and 0.20 in August and November, respectively. In the third and final inclusion factor increase, MSCI will also include mid-cap China A Shares in its emerging market indices.

In addition to its China A shares weighting adjustment in its emerging market indices, MSCI is adding Saudi Arabia and Argentina securities to the same products. 30 Saudi Arabia shares and 8 Argentinian shares will be added to MSCI Emerging Market indices, with aggregate weight of 1.42% and 0.26%, respectively.

In April, ETF Stream revealed BlackRock launched a Saudi Arabia ETF, responding to the news MSCI was to include the country in its EM indices. Invesco and HSBC GAM have also unveiled products in response to the inclusion.

MSCI is further diversifying a number of its ranges through the addition and deletion of securities from its indices. Its Global Standard, Global Small Cap, Global Investible Market, Global All Cap, Frontier Markets, Global Islamic, US Equity and US REIT indices will all have securities added and removed by the end of the month.

Finally, MSCI has said it will launch the MSCI Malta Investable Market index which will include one standard size constituent and two small-cap size constituents.

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