China in US Stock Market China Near To Joining Influential

| June 1, 2016

Question
China in US Stock Market

China Near To Joining Influential Stock Exchange
by: Carolyn Cui
Jun 10, 2015

Link:http://www.wsj.com/articles/chinese-stocks-wont-yet-join-mscis-widely-tracked-emerging-markets-index-1433885346?mod=djem_jiewr_IB_domainid

TOPICS: International Stock Market

SUMMARY: Index provider MSCI (Morgan Stanley Capital International) said Tuesday that it would add China’s A-shares, those stocks denominated in yuan and listed in either Shanghai or Shenzhen, to its widely tracked Emerging Markets Index at some point in the future when China resolves certain issues, which center on foreign investors’ capacity to freely buy and sell securities and to complete transactions in a timely manner. This index is tracked by funds with $1.7 trillion in global assets. MSCI’s decision moves China closer to be in the global-investing big leagues, a recognition that the country is a magnet for global capital, following years of overhauls that have vastly expanded foreigners’ capacity to trade its assets and currency. Also, it recognizes Western investors’ calls for greater protections as they approach a market that has boomed in 2015, but whose reputation was tarnished by poor disclosure and other ills. Listing A-shares in the index would also lower financing costs for Chinese companies and bolster global access to one of the fastest-expanding large economies, despite a recent slowdown.

CLASSROOM APPLICATION: The article highlights index provider MSCI’s decision to add China’s A-shares in its widely tracked index in future if certain market issues are addressed. It also discusses the significance of the inclusion of Chinese stocks in the index.

QUESTIONS:
1. (Introductory) What did index provider MSCI determine regarding China’s A-shares?

2. (Advanced) What issues China need to resolve before its A-shares are included in Emerging Markets Index?

3. (Advanced) What is the significance if China’s A-shares are included in Emerging Markets Index?

4. (Introductory) What is the name of MSCI’s widely tracked index?

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