Chinese stocks rose the most in two weeks on Wednesday as regulators and investors shrugged off a decision by MSCI Inc not to add A-shares to one of its key benchmark indexes.
Deng Ge, spokesman for the China Securities Regulatory Commission, said in a statement, "The decision by MSCI to delay the A-share inclusion will not affect the opening of the Chinese capital market and the process of market-driven reform with emphasis on the rule of law."
The Shanghai Composite Index rose by 1.58 percent to close at 2,887.21 points, while the ChiNext index, which tracks innovative startup companies in Shenzhen, rose by 3.42 percent to close at 2,128.8.
Lu Wenjie, China equity strategist at UBS Securities, said investors will still add to their positions in Chinese equities, and concerns over market transparency should ease gradually along with China's continued liberalization of its capital account.
Guan Qingyou, chief economist at Minsheng Securities in Beijing, said investors should take the MSCI decision in their stride. In the long run, inclusion of A-shares is a certainty and just a matter of time, as China's capital market evolution and reforms have been progressing steadily.
Analysts at Goldman Sachs said the commission's statement indicates that the regulator aims to continue further enhancing market accessibility and to align domestic practices with international ones.
They also said the Shenzhen-Hong Kong Stock Connect, similar to the existing trading link between Shanghai and Hong Kong, could be launched in the fourth quarter of this year.
Remy Briand, MSCI managing director and global head of research, said significant steps have been taken toward the eventual inclusion of China A-shares in the MSCI Emerging Markets Index, as A-shares demonstrate a clear commitment by the Chinese authorities to bring accessibility to the domestic market closer to international standards.
Analysts said regulatory hurdles and restrictions remain on overseas investors accessing the Chinese stock market, which could help explain MSCI's decision on the exclusion.
Wendy Liu, chief China strategist at Nomura Securities said, "The 20 percent of net asset value monthly repatriation limit for Qualified Foreign Institutional Investors and Renminbi Qualified Foreign Institutional Investors remains a significant hurdle for investors ...
"However, removal of the limit may increase the pressure on capital outflows during onshore market downturns, and this is a valid concern for Chinese authorities," she said.
