MSCI keeps China 'A' shares out of key index

Global equity index provider MSCI again put off Tuesday the inclusion of China's "A" shares in its influential Emerging Markets Index, citing the need for greater market accessibility to global investors.

It was the third year in a row that MSCI left the Chinese shares out of the index, which guides the allocation of billions of dollars of investments.

Inclusion could help steer more foreign portfolio investment into China at a time when the country is fighting off capital flight and a downturn in foreign direct investment.

China has provided greater access to its domestic, renminbi-based capital markets in the past year, MSCI said, including offering US investors a $38 billion investment quota last week for the first time to buy Chinese assets.

But MSCI said China still maintains problematic restrictions including a 20 percent monthly repatriation limit, which it called "a significant hurdle for investors," and too many restrictions on new financial product offerings.

"International institutional investors clearly indicated that they would like to see further improvements in the accessibility of the China A shares market before its inclusion in the MSCI Emerging Markets Index," said Remy Briand, MSCI Managing Director.

At the same time, Briand credited Chinese authorities with having cleared up other deterrents to foreign investors, including issues on beneficial ownership of shares and regulations on trading suspension. 

"They demonstrate a clear commitment by the Chinese authorities to bring the accessibility of the China A shares market closer to international standards," he said.

Foreigners wanting to buy Chinese shares have been mostly restricted to "B" shares denominated in US or Hong Kong dollars and traded in Shanghai and Shenzhen, or "H" shares traded in Hong Kong.

Those restrictions have kept international money out of what are now some of the world's largest markets by capitalization.