China stocks barely moved on Tuesday morning as investors awaited a decision by U.S. index provider MSCI on whether to add mainland shares to its Emerging Markets Index. The CSI300 index was unchanged at 3,552.56 points at the end of the morning session, while the Shanghai Composite Index gained 0.1 percent, to 3,146.25 points. The MSCI decision is due Tuesday afternoon in the United States (4.30 am Wednesday Hong Kong time). Northbound trading under the mainland-Hong Kong stock connect schemes has averaged a net inflow of 1.21 billion yuan ($177.15 million) per day in the last two weeks, more than the 938 million yuan in the first five months of the year, as investors expected the inclusion.
Many investors predict that the so-called A shares which make up the majority of China’s stock market will be included by MSCI, which has rejected this on three previous occasions. But Yan Kaiwen, an analyst with China Fortune Securities, said he believes inclusion of A-shares is “not that likely”. But if MSCI again rejects inclusion, the impact on Chinese markets “could be rather limited”, he said.
Generous money injections by the central bank are helping to maintain some calm in China’s financial markets, but market interest rates are persistently high, reflecting worrie that liquidity conditions remain unusually tight. Yan said the central bank intends to maintain stability in the market at particular times, such as providing funds ahead of the mid-year macro-prudential assessment (MPA).
On Chinese stocks markets, most sectors were largely unchanged on Tuesday. Material stocks led gains, while healthcare shares fell. Hong Kong stocks edged lower, with the benchmark Hang Seng index dropping 0.1 percent, to 25,903.82 points. The Hong Kong China Enterprises Index lost 0.4 percent, to 10,477.83.