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Yuan Gains as MSCI Accepts China A-Shares After 3 Years of Denial

Yuan Gains as MSCI Accepts China A-Shares After 3 Years of Denial

Daniel Dubrovsky, Contributing Senior Strategist

Talking Points:

  • Yuan gains as MSCI ruled to include Chinese shares in its EME index
  • The announcement crossed the wires following three years of rejection
  • More volatility could come at Shanghai Stock Exchange market open

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The Chinese Yuan appreciated against its major peers, as expected, after MSCI ruled to include 222 China A-shares in its emerging markets index. They are to carry around 0.73% of the weight at a 5 percent partial inclusion factor. This announcement followed three years of rejection, striking gold on the fourth attempt.

MSCI’s Managing Director Remy Briand said that all of the conditions are set for them to proceed with the first step of the inclusion process as international investors have embraced positive changes in the accessibility of the China A-shares market. The full details of the press release can be found here.

As Currency Analyst and China financial news specialist Renee Mu mentioned, Chinese markets were awaiting MSCI’s decision as approval could have a few impacts. In the short term, local retail investors are more likely to rush to buy stocks rather than foreign buyers. In the long run, it could reduce capital outflows if not reverse it.

More volatility could yet come. The decision crossed the wires outside of Shanghai Stock Exchange (SSE) hours. SSE will open for trading later today between 1:15 to 1:30 GMT, giving local markets a chance to respond to the news.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.