Should investors worry about China A-share inclusion on MSCI EM and MSCI ACWI index?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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All eyes will be on the MSCI Semi Annual Index review which will be announced on May 15, including a list of stock additions and removals along with changes in weightings. The changes will be effective on June 1.

In June 2017, MSCI announced that beginning June 2018, China A-shares will be included in the MSCI Emerging Market (EM) and MSCI All Country World Index (ACWI) Index.

According to Morgan Stanley note, as result of China A-share inclusion, India’s weight in EM would likely fall by approximately 20 bp by August, implying total outflows of around $540 million by passive funds.

India’s current weight in MSCI EM is 8.5%.

MSCI India index is also expected to see some potential changes in the semi-annual review.

Potential changes according to Morgan Stanley note are candidates for inclusion – Power Grid and Pidilite (High probability), while companies– Avenue Supermart, Future Retail, HDFC Life and Interglobe are also potential candidates to be added (the probability of these stocks however are low.

In terms of candidates for exclusion, Morgan Stanley expects Tata Motor, Vakrangee to be removed, while stocks like Ultratech Cement and Concor will be in focus for potential weight increase.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow