GLOBAL equity index provider MSCI Inc. said it is unlikely to add shares of companies listed on the Chinese mainland to its emerging markets index if there was a considerable delay in the launch of a pilot program linking the Shanghai and Hong Kong stock markets.

    “In the end, we have a timetable in this process,” MSCI Hong Kong’s managing director Chia Chin-ping said yesterday. “If nothing happens by the end of this year, stretching to June of next year, you can expect that we are not going to make any change.”

    Chia said the January-to-June date range reflected the need for MSCI to observe the operation of the pilot and for investors to have enough time to get operationally ready for the new environment.

    Industry insiders had speculated that the launch of the program, which would potentially make it much easier for foreign capital to move in and out of the mainland stock markets, would mark a key reform that would allow MSCI to include yuan-denominated A shares in its index.

    However, Hong Kong regulators said Sunday that the connecting pilot program would not launch this week as originally expected as it had not won regulatory approval.

    “If the program is not launched, we are back to square one, looking at QFII and RQFII, and given we are fresh off the consultation I think we pretty much know the view of our investors,” Chia said.

    Chia was referring to other qualified institutional investor (QFII) programs that allow foreign investors to buy shares in mainland companies through fund management companies that are granted investment quotas.

    MSCI said in March that it planned to include China A shares in its benchmark emerging markets index as early as next May, a move which would have ploughed billions into Chinese stock markets as investment funds tracking the index adjusted their holdings by buying up A shares.

    But in June, MSCI said it had decided not to do so due to resistance from its client base, who were concerned about the risks presented by liquidity and regulations, in particular a lack of clarity on how profits would be taxed. (SD-Agencies)