Bulls In The China Shop

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What's going on?

On Friday, 230 Chinese companies’ stocks will be added to a major benchmark of emerging market (EM) shares opening up the worlds second biggest stock market to many more global investors

What does this mean?

MSCI a company that groups stocks into certain baskets (a.k.a. indices) for investors will include Chinese stocks in its lists, recognizing the steps the countrys taken to become more open to foreign investors.


It needs to be easy for investors to buy and sell stocks in the companies added, so many of them are blue chips Chinas largest companies. By being added to these investment lists, some investors are obliged to buy shares, which could result in up to $10 billion being invested in Chinese equity markets.

Why should I care?

For you personally: You might become more invested in Chinese companies.


US robo advisors have 13% of an average 25 year-old’s money invested in emerging markets for UK robo advisors, its 15% (tweet this). Robo advisors typically keep costs low by investing in exchange-traded funds (ETFs), including ones by MSCI for emerging markets. From Friday, you may have a greater share of Chinese stocks in your portfolio which, as well as higher returns, can come with added risk.

In contrast to developed markets like Europe or the US, companies in emerging markets tend to have fewer regulations on how theyre allowed to behave, looser financial markets and less stable governments all of which can result in sharp movements in the prices of currency, stocks and bonds.



For markets: Chinas opening up to the world.


In April, Chinas president reiterated vows to open up the countrys economy to the international community. Its stocks inclusion by MSCI represents another small step towards opening up its markets. This first inclusion only represents a small part of the overall stock market but many analysts expect more stocks to be added in time.

Originally posted as part of the Finimize daily email.

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