China is now the world's second largest economy (soon to be number one). The domestic stock market known as "A-shares" is already the second largest stock market globally. However, the foreign ownership of China A-shares remains low for a number of reasons. This is about to change.
The Globalization of A-shares refers to the paradigm shift as a result of the global index inclusion and the increasing foreign participation. We estimate A-shares will account for over 20% of the MSCI or FTSE emerging market index with the full inclusion. By then, all China shares should easily surpass 50% weight in emerging markets, up from approximately 40% today. (All China shares refer to the combination of A-shares, B-shares, H-shares, Red Chips, and ADRs etc.)
We expect over USD 600 billion of inflow into China A-shares over the next 3-5 years. The game changer goes beyond the capital inflows. Please contact us if you'd like to learn more about this topic, what it means to global investing, and how best to position for this important change.
Note: The Globalization of A-shares is a term coined by MegaTrust Investments in 2015. Our proprietary research on this topic is available on the CFA Asia-Pacific Research Exchange platform. You can download the report by clicking here.