Why MSCI did not add China A- Shares To The MSCI Indices

By | June 10, 2015

Many investors were disappointed around the globe with  MSCI decision of not adding  China  A-Group share to The MSCI Indices. It has been delayed for sometime, but many fund managers are taking sigh of relief of not adding China A group shares. Reason being the volatile nature of Chinese stocks, Even though they have returned 152% in past 1 year but correction as and when it comes are very fast down 4-6% in a day which gives many sleepless nights to many fund manager looking at the volatility of their portfolio.

Bears in India were specifically waiting for the decision, as if added can see almost 1Billion$ sell off in India market and could have lead to break of sacrosanct 8000 level.

Chinese stocks are around 4 times more volatile than the current MSCI World index in other words, if asset allocators maintain current equity weightings then portfolio risks will soar (if China is added). But given that most risk budgets are fixed, rising volatility in the equity portion of portfolios (from adding China) will require rotation out of equities and into bonds (or lower vol assets) in order to maintain VaR limits.

 

 

Charts: Bloomberg

6 thoughts on “Why MSCI did not add China A- Shares To The MSCI Indices

  1. Rags

    My opinion: No V shape recovery but 8250 – 8300 is what we can see or even 8450 – 8500 where thr vl be resistance.

    Thank You.

  2. Shiva Kumar

    By this decision, what will be Impact on Indian equity markets.

  3. Abhi

    I don’t see much positive for the Indian market but YES the big sell of has been averted with this non inclusion.

  4. milanhbk

    so that’s why indian market are in v-shape ? will indians market recovery continue ?

  5. Meena

    Wow….simply great n smart way of analysis in real time of world….Kudos Brameshji

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