GLOBAL index provider MSCI Inc. on Friday added 226 yuan-denominated A shares to its emerging markets index for the first time in a step toward deeper integration of China’s bourses with the rest of the world.

Investors expect the move to attract billions of dollars in inflows to the mainland stock market and the partial inclusion of A shares to MSCI’s Emerging Markets Index takes place in two phases, with the second step only coming in September.

Among the names included were a mix of financials, consumer and developer names such as Kweichow Moutai, which makes premium liquor, BYD, an electric vehicle manufacturer, China’s largest lender Industrial and Commercial Bank of China and Ping An Insurance.

Upon completion of initial A shares inclusion, China’s proportion of the index, which currently includes shares of mainland companies listed in Hong Kong, will stand at 31.3 percent. Full inclusion would see A shares account for 16 percent of the index and China making up 42 percent of the index.

Although the MSCI-related inflows will initially be small compared with the size of China’s stock market, inclusion in the global index could spawn other funds and boost interest in Chinese companies over time.

“On a longer-term basis, the opening of China’s capital markets represents a once-in-a-lifetime market event and will be one of the primary ongoing themes in the region for many years to come,” said Will Stephens, Deutsche Bank equity strategist.

China’s MSCI entry will integrate the world’s second-biggest equity market, with a total stock market capitalization of more than US$8 trillion, into the global financial system.

More foreign participation in Chinese stocks could help improve investment culture, and press China-listed firms to bolster their corporate governance, said Shi Bin, head of China equities at UBS Asset Management.

“Index inclusion will bring more long-term institutional investors into the A-share market...which will change the market structure,” Shi said, noting that the market is currently dominated by retail investors.

“As overseas investors become more active in the market, so listed companies in China will be under tougher scrutiny and they’ll have to bring their disclosure and governance practices into line with international standards.” (SD-Agencies)