Foreign fund inflows into China stocks jump as MSCI decision looms

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Hong Kong | Published: May 31, 2016 12:31:07 PM

Investment under the Shanghai-Hong Kong stock connect scheme has also regained some momentum recently. The northbound investment amounted to 3 billion yuan ($455.77 million) on Monday, the highest level in well over a month.

The decision from the MSCI, which in March said that alleged anti-competitive behaviour by China’s exchanges may keep mainland Chinese shares out of its benchmark, is expected on June 14. (Reuters)

The largest China-focussed exchange traded fund (ETF) denominated in the yuan currency drew its biggest daily inflows in the past year on Monday, partly driven by expectations of China A shares being included in a global benchmark.

The inflow of 2 billion yuan ($303.89 million) into the CSOP FTSE China A50 exchange-traded fund accounted for around 10 percent of the fund’s total asset under management (AUM).

The rush of funds came just as index provider MSCI started a third round of consultations with investors over whether to include China’s yuan-denominated A shares in its emerging markets benchmark.

The decision from the MSCI, which in March said that alleged anti-competitive behaviour by China’s exchanges may keep mainland Chinese shares out of its benchmark, is expected on June 14.

“I believe it (the inflow) is global investors’ response to a series of recent positive measures taken by the Chinese government and the regulators,” said Ding Chen, CEO of CSOP Asset Management.

Investment under the Shanghai-Hong Kong stock connect scheme has also regained some momentum recently. The northbound investment amounted to 3 billion yuan ($455.77 million) on Monday, the highest level in well over a month.

Earlier on Tuesday, Goldman Sachs raised the odds for the June A-share inclusion from 50 percent to 70 percent, citing positive measures from the Chinese government recently.

These include the China Securities Regulatory Commission (CSRC) clarifying its stance on beneficial ownership of securities through nominee holder, and other guidelines related to stock suspensions in the A-share market.

China stocks jumped roughly 2 percent on Tuesday morning to a three-week high.

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