Don’t expect to see an immediate boom in Chinese sharemarkets from today after the global index group, MSCI deferred a decision on the immediate inclusion of so-called A-List shares in its widely followed Emerging Markets and other global market benchmarks.
MSCI said in a statement posted on its website at 7.30 am today, Sydney time, that there are a “a few important remaining issues related to market accessibility have been resolved.” So no immediate inclusion.
MSCI said it is forming a working group with China’s Securities Regulatory Commission to settle the questions it wants answered that a decision could be announced as soon the issues are addressed.
“Substantial progress has been made toward the opening of the Chinese equity market to institutional investors,” Remy Briand, MSCI Managing Director and Global Head of Research said in a statement.
“In our 2015 consultation, we learned that major investors around the world are eager for further liberalization of the China A‐shares market, especially with regard to the quota allocation process, capital mobility restrictions and beneficial ownership of investments,” MSCI said.
MSCI listed some of the issues to be discussed with Chinese regulators including the allocation of investing quotas for large investors, capital mobility and details over beneficial ownership.
When inclusion comes it could attract billions of dollars to Chinese equities listed in Shanghai and Shenzen as portfolio managers benchmarked to or tracking MSCI indices shift into mainland securities and out of just being allowed yo buy Chinese shares in Hong Kong. Marketwatch has estimated that $US1.7 trillion in funds are tracking MSCI’s emerging markets index.
The Shanghai market closed down 0.35% yesterday as local investors took a breather from the huge run up which has seen the market add nearly 10% in value since the start of last week and over 150% in the past year.
So for the local market in Australia and others in Asia, there will be no positive lead from China today.
For the Australia there will be hopes that the sell off will end today – the overnight futures market was showing a small gain at one stage, but it dipped in late trading to suggest a loss of just one point for the physical market this morning.
So far we have seen six days of losses for the ASX, with a correction at hand and the last of 2015’s gains.
That’s the immediate outlook for the Australian stockmarket as it looks to join major offshore markets like Germany’s Dax in correction territory, and the Dow in destroying this year’s gains.
The ASX 200 fell 27 points or half a per cent to 5471 yesterday, while the All Ordinaries also finished the day 27 points or 0.5% to 5479.
The ASX 200 is now just 82 points shy of a technical correction, or 10% slide from April’s recent high of 5997 points, and it is within sight of the start of the year when it was just under 5,400 points.
There was no strong lead from the US market overnight.
The Dow fell 2.51 points, or 0.01%, to 17,764.04, the S&P 500 rose a whole 0.87 points, or 0.04%, to 2,080.15 and the Nasdaq Composite 7.76 points, or 0.15%, to 5,013.87.
Major European markets fell for a sixth straight session and other markets in Asia were also weak yesterday.
For local investors at least there will be another rise in global iron ore prices to consider.
At the end of the latest session overnight iron ore prices settled at $US63.90 a tonne, up 0.2% from its prior close of $US63.80 a tonne.
The recent rally has driven the commodity to its highest mark since mid-February and nearly 40% above the 10-year low of $US46.70 a tonne it touched in early April.
