MSCI Denies China’s Widely Expected Inclusion into its Benchmark

This comes as no surprise to me. However and apparently so, everyone seemed to think this was a foregone conclusion. The caitiffs and the scoundrel dog eaters in China have been denied entry into the heavily traded MSCI index, based around the narrative that China is a fucked up place that doesn’t permit people to repatriate money (20% annual cap) out of the country.

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index,” said Remy Briand, global head of research at MSCI

MSCI announced today that it will delay including China A shares in the MSCI Emerging Markets Index.

Over recent months, Chinese authorities have introduced significant improvements in the accessibility of the China A shares market for global investors. These improvements touch the major categories previously cited as impediments to inclusion: (1) resolution of the issues regarding beneficial ownership, (2) enhanced regulations on trading suspension, which was flagged as the most critical by investors, and (3) QFII policy changes aimed at addressing quota allocation and capital mobility restrictions.

“International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index. In keeping with its standard practice, MSCI will monitor the implementation of the recently announced policy changes and will seek feedback from market participants.

The 20% monthly repatriation limit remains a significant hurdle for investors that may be faced with redemptions such as mutual funds and must be satisfactorily addressed.

Finally, the local exchanges’ pre-approval restrictions on launching financial products remain unaddressed.

Hence, MSCI will retain the China A shares inclusion proposal as part of the 2017 Market Classification Review. MSCI does not rule out a potential off-cycle announcement should further significant positive developments occur ahead of June 2017.

Aside from repatriation concerns, the Chinese A-share market is 90% plus traded by pitched forked wielding farmers, who’ve traveled by rickshaw to buy a few shares in one of many scam stocks traded on the exchange. This denial was a no brainer for the MSCI, and a clown-slap to the faces of all of those rice paddy farmers who relished the idea of getting liquid on large Asian-Pacific asset managers.