Nikkei nears two-year high as US hi-tech rebound boosts mood

Nikkei nears two-year high as US hi-tech rebound boosts mood

Zhang Xiaojun, a spokesman for the China Securities Regulatory Commission.

At this stage, the proposition from MSCI is to include China A-shares in the MSCI Emerging Markets Index with a weighting of around 0.50 per cent, which equates to approximately a 5 per cent inclusion factor, restricting the investment universe of investable China A-share companies from an estimated 448 to 169 stocks.

"The inclusion could bring about 60.7 billion yuan into the (A-share) market, but the impact would be limited if the inclusion does not happen", Haitong Securities wrote.

Global equity index provider MSCI Inc mentioned in March that it will focus on a smaller number of A-share companies, raising expectations that A-shares could finally be included in the worldwide benchmark index this year.

China's securities regulator vowed last week to stick to capital market reforms regardless of whether the country's A-shares are included in the MSCI Emerging Market Index.

The net liquidity injection through reverse repos was 110 billion yuan Monday, following last week's net injection of 410 billion yuan to ease a seasonal liquidity strain. The number pales in contrast to A shares' current margin loan balance of 867 billion yuan and the daily trading turnover of 400 to 600 billion yuan.

MSCI is expected to give A-shares a 0.5 per cent weighting in the first instance, half the originally proposed amount, after the provider opted to revise its inclusion policy.

"Regardless of the outcome, we do not think there will be a meaningful impact at index level on the A-share market in the near term", they wrote in a report.

The CSI300 index was unchanged at 3,552.56 points at the end of the morning session, while the Shanghai Composite Index gained 0.1 percent, to 3,146.25 points.

However, actual implementation would not take place until June 2018.

"There is a 50 percent possibility that the MSCI will include China A-shares this year as the two cross-border investment schemes have improved the accessibility of the A-share market", said Jing Ulrich, vice-chairwoman of Asia Pacific at JPMorgan Chase & Co.

"Collectively for global passive AUM (assets under management) that track MSCI indices, the A-share inclusion would add only US$1 billion to US$1.5 billion of passive fund inflows, a very small fraction of total A-share market cap and trading volumes", they said.

Foxconn Technology Co. jumped 6 percent ahead of its annual general meeting this week, for the third-best performance in the regional benchmark, following China Evergrande and Travelsky Technology's 8.6 percent surge.

"These programs are essential in paving the way for Chinese equities and bonds to be included in major global indices", she added.

As far as MSCI is concerned, they have just completed a recent round of global consultations with worldwide investors and will announce the results on 20 June.

On the other side, a few investment institutions hold more conservative views on the probability of MSCI's acceptance.

The only obstacle to overcome is the pre-approval requirement.