Under new chief, China's securities regulator pushes fixes ahead of MSCI deadline

Fri Jun 10, 2016 7:01am EDT
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By Michelle Price

HONG KONG (Reuters) - China's securities regulator has rushed through stock market rule changes under its new chairman in a bid to persuade MSCI to include domestic Chinese shares in one of its global benchmarks.

The New York-based index provider will announce on June 14 if China has done enough to overcome investor concerns, which were heightened by its heavy-handed response last year to a stock market crash.

A decision to allow yuan-denominated shares - or A shares - into its widely used Emerging Markets Index, could draw $400 billion into Chinese shares in the next decade, MSCI estimates show.

Still, while China has met some key requirements of the MSCI, other concerns remain unaddressed, investors and people familiar with the discussions said, making the widely anticipated decision far from certain.

The MSCI told China last June that it needed to increase access to its equity markets and fix other rules to win foreign investor backing for inclusion in the benchmark, tracked by $1.5 trillion in assets globally.

Scepticism China could satisfy the requirements deepened owing to unprecedented intervention by authorities during last summer's stock market crash. As shares slumped more than 40 percent in a few months, more than half of Chinese companies suspended their stocks to avoid the slide.

Over the past four months though, the China Securities Regulatory Commission (CSRC) has stepped-up its efforts to woo global benchmark providers under a new reform-focused senior management team led by Chairman Liu Shiyu, investors and people familiar with the discussions said.

A CSRC spokesman said an MSCI Emerging Markets Index without A shares was a "shortcoming" and the regulator would be happy to see them included.   Continued...

Investors look at computer screens showing stock information at a brokerage house in Shanghai, China, April 21, 2016. REUTERS/Aly Song