The Association of the Luxembourg Fund Industry (ALFI) welcomes the decision of MSCI to include China A-Shares (5%) into the MSCI Emerging Markets Index, resulting in an approximate weight of 0.73% in the index which was announced yesterday.
“The decision of the MSCI to include China A-shares into the MSCI EMI has been long awaited by all market participants. Over the past few years, authorities in China have embarked on an ambitious agenda for the liberalisation of capital markets in the mainland, which is now reaping benefits,” said Marc-Andre Bechet, Director of Legal and Tax Affairs at ALFI.
“The weight which is assigned to China A-shares is still modest compared to the size of China’s economy, now the second largest in the world. From a market stability standpoint, this is a smart move as it is unlikely to create any disruption in equity markets,” added Bechet.
Luxembourg has had a long tradition of acting as a facilitator for inbound and outbound investment in mainland China, particularly in the asset management sector.
“Luxembourg recognises the opportunity to act as the centre of reference for investors looking to gain access to China’s equity markets and beyond to invest in other asset classes. Luxembourg investment funds were the first European funds to make use of Stock Connect, as early as December 2014 for Shanghai HK Stock Connect and more recently in December 2016 for Shenzhen HK Stock Connect.
Similarly, QFII/ RQFII schemes have been used as early as 2002 (QFII) and 2013 (RQFII). Since the granting of a Luxembourg quota, seven Luxembourg-based institutions have been granted an RQFII licence and quota.
“In light of the MSCI decision, Luxembourg investment funds are ideally placed to take advantage of this new and strategic opportunity,” concluded Bechet.