China Wants to Throw More Weight in Emerging Markets Index

China’s securities regulator is working on measures to help increase Chinese stocks’ weighting in the influential Emerging Markets Index published by MSCI Inc., Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said Thursday.

MSCI added 226 A-share stocks, or yuan-denominated shares listed in Shanghai and Shenzhen, to its benchmark Emerging Markets Index June 1. The index is tracked by money managers with $1.6 trillion in assets, according to MSCI. The inclusion of Chinese stocks culminated a years-long campaign by Beijing to broaden foreign participation in the nation’s stock markets.

Between June 1 and June 11, daily net capital inflows to the mainland markets through stock connect programs linking bourses in Shanghai and Shenzhen with Hong Kong surged 167% from similar periods in previous months to 3.16 billion yuan ($494 million), according to Fang.

Under a phased inclusion plan, the Chinese shares were granted a 2.5% inclusion factor on June 1, giving them an aggregate weight of 0.39% of the index. Another 2.5% inclusion factor will be added after MSCI’s quarterly index review September 3, sending the aggregate weight of A-shares to 0.78% in the index.

The CSRC wants to bump up China’s inclusion factor to 15%, Fang said at the Lujiazui Forum in Shanghai. To accomplish that, the CSRC is working on new systems and policy tools including a stock pricing mechanism, trading suspension rules and foreign access to stock index futures trading, Fang said

China will “reform the capital market arrangements in accordance with the demands of qualified and mature investors,” Fang said. “Opening-up is the inevitable path for long-term development of the capital market.”

Regulators are mulling more policies to grant foreign investors wider access to China’s securities markets, including a Shanghai-London stock connect program scheduled by year end and allowing foreign investors to trade more domestic futures contracts, Fang said.

Contact reporter Han Wei (weihan@caixin.com)