Global market research and index company MSCI said on Tuesday it would add 234 China-listed shares to its emerging market benchmark in a two-step process in June and September, a move expected to drive a surge of foreign inflows into the country's stock markets.
While some foreign investors are still haunted by memories of China's 2015 stock market crash and concerns about Sino-US trade frictions, a deeper fear of missing out is widely expected to boost overseas investments in mainland stocks.
MSCI's decision last June to include yuan-denominated Chinese stocks, known as "A-shares", into its emerging market (EM) index triggered a rally in Chinese blue-chips in 2017, though the market has corrected this year amid fears that a trade war will undermine the world's second-largest economy.
The CSI300 index was down 0.3 per cent at 3,896.56 points at the end of the morning session on Tuesday, while the Shanghai Composite Index lost 0.2 per cent to 3,167.16 points.
The Hang Seng index dropped 0.9 per cent to 31,256.32 points, while the Hong Kong China Enterprises Index slipped 0.7 per cent to 12,455.58.
But with the MSCI inclusion nearing, there are signs of renewed interest in Chinese big-caps as asset managers have been rushing to launch funds tracking MSCI A-share indexes.
What exactly is MSCI inclusion?
MSCI, a US-based creator of widely-watched stock indices, will add 234 mainland traded big-caps to its benchmark Emerging Markets and All Country World Index indices. The companies are predominantly blue chips, like Shanghai-listed SAIC Motor Corp or famed liquor maker Kweichow Moutai.
Why is this important?
MSCI's indices are closely watched and trusted. Its EM index has funds with assets under management in excess of $1.6 trillion benchmarked to it. That means that when Chinese shares are added to the index, money that follows the benchmark will have to buy Chinese stocks to avoid deviation.
Some analysts estimate about $20 billion will initially flow into Chinese stocks. That amount could rise to $300bn if there is full inclusion, as many market watchers expect. Some investors, however, predict much smaller inflows in the short term.
The 234 yuan-denominated stocks, or China A-shares, will represent an aggregate weight of 0.39 per cent in the MSCI Emerging Markets Index at a 2.5 per cent partial inclusion factor during the first step of the China entry. The second phase of the entry will take place in September.
Further inclusion could potentially include an increase of the weighting as well as the addition of mid-cap A-shares. A full inclusion will see China A-shares account for about 18 per cent of the MSCI EM index.
Why didn't it happen sooner?
In 2013, MSCI put A-shares on a review list but declined to include them in any indexes, citing issues including capital mobility restrictions and uncertainties around taxes. It continued to reject A-shares in 2015 and 2016.
Finally, in June 2017, MSCI announced the partial inclusion this year following a fourth consultation with global investors, recognising China's efforts to reform its capital markets.
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How can foreigners buy Chinese shares?
China's markets are not fully open to foreigners, but there are a handful of ways they can get exposure.
1. QFII, or the Qualified Foreign Institutional Investor scheme, allows certain institutions to directly invest in Chinese stocks, within limits. The State Administration of Foreign Exchange has granted $99.5bn worth of quotas for QFII investment.
2. RMB QFII. This allows the use of offshore yuan to invest in Chinese shares.
3. Shanghai and Shenzhen "stock connect". These two-way investment schemes between Hong Kong and the mainland's two main bourses allow investors to buy Chinese shares through the former British colony, and vice versa. The daily quota for "northbound" purchases of shares quadrupled to 52bn yuan (Dh30.04bn) from 13bn yuan on May 1.
There had been concern among global investors that money flows from Hong Kong into China via the stock connect scheme around the time of the MSCI inclusion may breach the daily quota, as passive index funds need to buy the new A-share constituents to avoid tracking error.
What has the trend been with foreign investment in Chinese shares?
Foreign investment in Chinese shares has been on the rise, but remains relatively small. There are restrictions on inbound investment but even so the "northbound" quota through the connect schemes has rarely been maxed out. Foreign investors have cited a litany of concerns, from unfamiliarity with Chinese companies to worries about corporate governance.
Some funds tracking the MSCI A-share inclusion index have seen heavy inflows since announcement of the China entry.
Do analysts expect further inclusion?
Yes.
MSCI has said further inclusion will be subject to China's moves to deregulate its capital markets, including granting foreigners more accessibility to its markets, making continued progress on trading suspensions, and further loosening restrictions on the creation of index-linked investment vehicles.
MSCI said it would continue to monitor the situation and launch a public consultation to solicit feedback from investors once warranted.
UBS strategist Gao Ting expects foreign ownership in the A-share market to be raised to 10 to 12 per cent in coming years, from less than 2 per cent currently, partly helped by MSCI's further inclusion of China stocks.
New York-based, China-focused asset manager KraneShares forecast that China's weight within MSCI Emerging Markets Index - including both A-shares and overseas-listed Chinese companies - will grow from 30 per cent today to over 40 per cent over the next several years due to the MSCI inclusion.
COMPANY%20PROFILE
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Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Graduated from the American University of Sharjah
She is the eldest of three brothers and two sisters
Has helped solve 15 cases of electric shocks
Enjoys travelling, reading and horse riding
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Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
Company%20Profile
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FULL%20FIGHT%20CARD
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Guns N’ Roses’s last gig before Abu Dhabi was in Hong Kong on November 21. We were there – and here’s what they played, and in what order. You were warned.
- It’s So Easy
- Mr Brownstone
- Chinese Democracy
- Welcome to the Jungle
- Double Talkin’ Jive
- Better
- Estranged
- Live and Let Die (Wings cover)
- Slither (Velvet Revolver cover)
- Rocket Queen
- You Could Be Mine
- Shadow of Your Love
- Attitude (Misfits cover)
- Civil War
- Coma
- Love Theme from The Godfather (movie cover)
- Sweet Child O’ Mine
- Wichita Lineman (Jimmy Webb cover)
- Wish You Were Here (instrumental Pink Floyd cover)
- November Rain
- Black Hole Sun (Soundgarden cover)
- Knockin’ on Heaven’s Door (Bob Dylan cover)
- Nightrain
Encore:
- Patience
- Don’t Cry
- The Seeker (The Who cover)
- Paradise City
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Results
STAGE
1 . Filippo Ganna (Ineos) - 0:13:56
2. Stefan Bissegger (Education-Nippo) - 0:00:14
3. Mikkel Bjerg (UAE Team Emirates) - 0:00:21
4. Tadej Pogacar (UAE Team Emirates) - 0:00:24
5. Luis Leon Sanchez (Astana) - 0:00:30
GENERAL CLASSIFICATION
1. Tadej Pogacar (UAE Team Emirates) - 4:00:05
2. Joao Almeida (QuickStep) - 0:00:05
3. Mattia Cattaneo (QuickStep) - 0:00:18
4. Chris Harper (Jumbo-Visma) - 0:00:33
5. Adam Yates (Ineos) - 0:00:39
COMPANY%20PROFILE
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2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
