U.S. index provider MSCI Inc said on Tuesday it will not add domestic Chinese equities to its global emerging markets benchmark index, concluding that the country has more progress to make in sufficiently liberalizing its capital markets.
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The decision is a setback for Chinese officials, who had hoped the inclusion of domestic stocks in the widely tracked MSCI Emerging Markets Index would usher in as much as $400 billion of funds from asset managers, pension funds and insurers to mainland China's equity markets over the next decade.
"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," Remy Briand, MSCI Managing Director and Global Head of Research, said in a statement.
Some $1.5 trillion globally is held in index funds that track the MSCI Emerging Markets Index, including the heavily traded U.S.-listed iShares MSCI Emerging Markets ETF.
Vanguard Group last year added A-shares to its broad emerging markets exchange-traded fund, Vanguard FTSE Emerging Markets ETF, which tracks a different index. (Reporting by Dion Rabouin and Trevor Hunnicutt in New York and Michelle Price in Hong Kong; Editing by Dan Burns and Matthew Lewis)