CHINA’S response to volatility in its stock and currency markets may have an impact on the country’s bid for entry into MSCI Inc.’s global equity benchmarks, according to the index provider.

    While the recent turmoil in Chinese markets and concern that the economic slowdown is worsening have no bearing on MSCI’s own assessment, the way the government has responded may impact the decision on whether to include A shares in a number of international stock gauges. Negative feedback from institutional investors on the effectiveness of policy changes could affect the final decision which is expected in June, according to Sebastien Lieblich, MSCI’s global head of index management research.

    “We are really looking at the structural element of a market, of its accessibility, so market volatility is not a consideration when we are looking at when deciding on the inclusion of a given market in the investment universe in general,” Lieblich said in a phone interview. “But if international investors come to us and tell us ‘No, the way the government has acted is just completely crazy and we don’t want that,’” then that may be considered a negative for the classification, he said.

    The government’s unprecedented efforts to stem a stock rout since mid-last year, including banning stake sales from major shareholders and restricting short-selling, have drawn criticism from international investors. Sentiment deteriorated further after regulators scrapped an ill-timed circuit-breaker system in January and a slew of shifts in the currency policy whipsawed investors.

    China’s government last week relaxed some of its restrictions on foreign funds, as part of its effort to elevate the status of mainland markets on the world stage and make the yuan a more international currency.

    (SD-Agencies)