A-shares saw record high USD 3.46 bln influx from HK Stock Connect
Nov 27, 2019 (China Knowledge) - RMB 24.3 bln funds flows from HKEx via the Stock Connect on Nov 26. This amount is more than 10 times increment from daily average of last week.
After today's close, MSCI's third inclusion of China’s A-shares of the year will take effect, raising the inclusion factor of China's large-cap A-shares from 15% to 20%. This expansion is the last and largest in the year. Analysis indicates that the weightage of A-shares will bring in RMB 100 bln (USD 14.23 bln) of incremental funds for A-shares.
According to the latest list released by MSCI, 244 large-cap stocks and 228 mid-cap stocks were included in the MSCI after the expansion. Of the mid-cap stocks, 39 were previously transferred from large-cap stocks to mid-cap stocks, and the other 189 mid-cap stocks were included for the first time.
With accelerated inflow of foreign capital, the proportion of foreign capital in the A-shares investors structure has increased rapidly. According to data from the Shenzhen and Shanghai Stock Exchanges the market value of A-shares held by overseas investors is close to RMB 1.8 trln (USD 260 bln), accounting for 3% of the total market value of A-shares, and 8% of free float market value.
Foreign investors have become an important influencer of pricing of A-shares. With China's financial liberalization, foreign investors will further expand their pricing power in A-shares, and in particular become an important influencer in the pricing of core assets. If MSCI, FTSE Russell, and other indexes achieve 100% inclusion of A-shares within the next 5 to 10 years, the allocation of A-shares will reach USD 480 bln (of which USD 130 bln will be passive funds).
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