China: MSCI weight increased – TDS

Analysts at TD Securities point out that the MSCI increased the weighing of China in its index as of yesterday, raising the weight from 0.71% to 2.82% by Aug next year.

Key Quotes

“MSCI is tracked by around $1.9tn of funds and the increased weighting is estimated to add around $125bn of inflows into China A shares this year. China’s equities have already rallied sharply, outperforming other Asian indices despite the gloomy economic news. Note that China will also be included in the Bloomberg Barclays global aggregate index in April, potentially adding another $200bn of inflows this year. Such inflows will be welcomed given the deterioration in China’s current account position, which could even fall into deficit this year.”

“Separately, China’s Caixin manufacturing PMI was stronger than expected in Feb at 49.9 (market 48.5, last 48.3). While still in contraction territory the data contrasts with the worsening in the official measure.”

“The Caixin survey is more focused on smaller and private companies, which are more exposed to the exports slowdown. The survey may have benefited from a greater push by the authorities to increase lending to this sector as well as hopes of a trade deal.”