GLOBAL index provider MSCI Inc. is considering significantly increasing the weight of Shanghai and Shenzhen-listed A shares in its global indexes from next year, as well as allowing in a raft of smaller tech stocks.

These moves, once implemented, will trigger fresh foreign inflows into China’s US$7 trillion stock market.

MSCI, which has included about 230 Chinese big-cap stocks in its flagship indexes with an initial inclusion factor of 5 percent, said in a statement yesterday that it has proposed to increase that factor to 20 percent. The proposed increase will happen in two phases coinciding with MSCI’s index reviews in May and August 2019, it said.

In addition, MSCI also proposed to add ChiNext shares to the list of eligible segments for inclusion starting from the May 2019 Semi-Annual Index Review.

MSCI also considers adding Chinese mid-caps with a 20 percent inclusion factor in one phase as part of the May 2020 Semi-Annual Index Review.

China’s A shares won entry to the MSCI indexes in June last year and were added to gauges in May and August. FTSE Russell will announce plans to include the stocks in its own measures today, according to people familiar with the matter. The Shanghai Composite Index has fallen 16 percent this year, among the worst performers worldwide, amid a trade dispute with the United States and slowing economic growth.

More than 4,600 new accounts have been opened to trade A shares via the Hong Kong stock trading link since the announcement of the MSCI inclusion. Authorities have increased daily quotas for the stock link, while the number of firms suspending their shares has decreased and the Shanghai Stock Exchange’s closing auction is working well, MSCI said, explaining why it wants to boost the weighting. (SD-Agencies)