MSCI has added mainland Chinese A-shares to its key emerging markets index

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China's had its bid rejected three times before today (Source: Getty)

MSCI, the world's biggest indexing firm, today agreed to include China-listed shares in its emerging markets benchmark.

The US index publisher said it will add Chinese A-listed shares after rejecting the bid for three years.

"This sharp increase in international market participants will substantially change fundamental features of the market," said Yannan Chenye, head of China equities research at Harvest Global Investments.

“The impact of new market participants might be slight at first, but we expect the impact to be far-ranging in the mid- to long-term."

Argentina, which has been off the index for eight years, was not added today.

The decision means emerging market investors around the world will track companies listed in mainland China for the first time, which is a vote of confidence for Beijing.

While MSCI’s emerging markets index already has a 28 per cent weighting to Chinese companies listed in Hong Kong and the US, investors have been keenly anticipating the decision, which represents another symbolic step towards greater financial openness for the world’s second largest economy.

MSCI has included 169 shares, which will now represent 0.5 per cent of the MSCI emerging market index.

Chinese A-shares, which are traded on exchanges in Shanghai and Shenzhen and quoted in renminbi, have been rejected three times by MSCI.

The index provider had expressed concerns about the availability of shares for foreign investors. In 2016 it reduced the number of shares under consideration from 448.

Foreigners were banned for years from owning stock in Chinese companies, but those restrictions have gradually been rescinded as the country’s financial markets have developed and become more open.

In 2003 access was allowed for qualified foreign institutional investors (QFII) for the first time.

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