There Is More Than One Reason For The Failure Of A-Share MSCI

MSCI has failed many times in the A-share market. This year, there is still uncertainty, but the probability of inclusion will gradually increase. In the short term, the benefits of A-share being included in MSCI are limited, but in the medium and long term, taking advantage of the opportunity of being included in MSCI will bring about medium and long term good expectations, and the healthy bull market expected for many years is expected to become a reality. A shares are included in MSCI, which is a topic that has been talked about in recent years. In fact, MSCI is not only the benchmark index most used by global portfolio managers, but also widely referenced by global professional investors. Its global influence is very high. However, in recent years, A-shares have repeatedly broken through MSCI, but all of them have failed.

The reason for the failure of A-share MSCI is actually the comprehensive influence of many factors. The criteria reviewed by MSCI mainly depend on factors such as local economic development, local market liquidity, market value of listed companies and market access conditions. But for the A-share market, it is still difficult to break through. Among them, liquidity barriers, including QFII capital redemption limit, redemption cycle, etc., have also brought restrictions on investors' liquidity, resulting in certain difficulties in capital redemption and cashing, which is a major reason for failure to break through the barrier. For foreign capital, liquidity is the key issue. If the capital can only enter but cannot exit, it will greatly weaken the enthusiasm of foreign investment.

Moreover, after the impact of the previous stock disaster, the "national team" funds have taken successive actions to rescue the market, which has more or less affected the degree of marketization of the A-share market. During this period, the wilful suspension of listed companies made it more difficult for A-share companies to break through MSCI. But as the systemic risk of the stock market has been alleviated, listed company The problem of wayward suspension and resumption of trading was rectified, but it indirectly added points to the inclusion of A-shares in MSCI.

In addition, it depends on the maturity of the stock market trading system and market operation. This is also very important for foreign investment. As for the "anti competition clause" with more market disputes, there is still a running in process, but this series of problems also affect the process of A-share market being included in MSCI. Recently, it was reported that MSCI planned to seek opinions from overseas institutional investors, make concessions with new plans, and put forward a plan to include A-shares in the global index downsizing. Affected by this, once the new scheme is established, the probability of A-share being included in MSCI will increase significantly this year.

It is worth mentioning that the new scheme is mainly based on the new framework of "connectivity", which is different from the previous scheme based on "QFII or RQFII". The new scheme is more conducive to the inclusion of A-shares in MSCI, but the investment object of A-shares included in the future may shrink significantly. In fact, in recent years, A-shares have made a lot of efforts to be included in MSCI, and also made a lot of efforts in QFII quota, suspension and resumption of trading, stock market maturity and other aspects. However, in view of multiple factors, it is a pity that the A-share market has not been able to successfully break through MSCI.

However, affected by this, for the interconnection mode A-share The blue chips in the large market constitute a positive impact. With MSCI, the A-share market is expected to exert better global influence. At the same time, it can also boost the process of RMB internationalization, guide the mature value investment concept of foreign markets to the domestic market, and promote the healthy development of the stock market in the medium and long term. However, even if A-shares are included in MSCI, their support for new liquidity in the market will be relatively limited. However, A-shares' inclusion in MSCI is not a short-term process, but a long-term process. The new liquidity supplement it brings to A-shares will also be a gradual process.

It should be noted that with A-share being included in MSCI, the domestic capital account is expected to be further opened in the future, and the frequency of intervention may also be gradually reduced, which will also be critical to the test of the risk resistance of the domestic market. In other words, when the market is further opened in the future, a slight carelessness may cause unnecessary fluctuation risk, even systematic risk. It can be seen that this is also a double-edged sword. If it is used well, it will create more favorable conditions for A-share to move towards the international stage.

MSCI has failed many times to pass the A-share hurdle and was incorporated into this year MSCI There is still some uncertainty, but the probability of inclusion will gradually increase. In the short term, the advantages of A-share being included in MSCI are limited, and the new liquidity introduced will be relatively limited, which is not enough to change the operation pattern of the whole market. However, in the medium and long term, as long as the domestic market is fully prepared to resist risks and takes advantage of the opportunity of being included in MSCI, it will also bring about a good expectation for A shares in the medium and long term, and the healthy bull market that the market has been looking forward to for many years is expected to become a reality.

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