The FSA Spy market buzz – 17 March 2023
JP Morgan’s active China, Chinese private funds growing fast, punditry torn apart, ratings agencies torn apart too, Larry Fink adds concern, Credit Suisse’s bad meme week, high wages and much more.
This year will be the fourth annual review by MSCI to consider whether it should include A-shares in its flagship emerging market indices, which are tracked by estimated $1.6trn. The decision will be announced in June.
The revised proposal by the MSCI in March has greatly downsized the number of A-shares eligible for the index inclusion.
HSBC Global Asset Management senior market specialist Grace Tam said the chance is high for an inclusion this year, although it is unlikely to have a meaningful impact to their funds’ portfolio positions.
The Shanghai-Shenzhen-Hong Kong Stock Connect already covers about 75% of A-share markets in terms of market capitalisation, granting easier access to majority of the stocks, she said.
She expected about $1.5-2bn of inflows into A-shares from passive funds tracking the MSCI emerging markets indices once the inclusion takes place, maybe in one year’s time, which is a relatively small amount of capital compared to the potential actively-managed fund flows.
“For active funds, they can make the call on whether to invest in A-shares or not,” she noted.
For HSBC GAM, “although we have the flexbility of allocating more into A-shares, we prefer H-shares at the moment”, she told FSA, based on factors such as valuations and earnings, rather than estimated fund flows.
“The positions of A-shares in our China funds account for about 2-3% of the total holdings, which is quite small,” she noted.
Part of Mark Allen.