GLOBAL index provider MSCI Inc. will expand the weighting of China-listed shares in benchmark indexes tracked by global investors, a decision that could see billions of dollars flow into China’s stock market.

The increase will occur in three steps this year beginning in May, with the weighting of Chinese A shares ultimately rising to 3.3 percent of the MSCI Emerging Markets Index in November from 0.72 percent.

The weighting increase, announced Friday, may be a milestone in China’s efforts to internationalize the yuan.

MSCI also said that it will add Chinese mid-cap stocks to its emerging market benchmark in November, boosting the number of Chinese constituents.

MSCI’s milestone China inclusion in 2018 was a positive experience for global investors, and “has fostered their appetite to increase further their exposure to the Chinese mainland equity market,” MSCI managing director Remy Briand said.

The decision, largely within expectations, marks a win for China, which has stepped up efforts to woo foreign investment in the face of a slowing economy and prolonged trade friction with the United States.

“Inclusion should boost investor sentiment and, over the long term, flows into China,” Caroline Yu Maurer, head of greater China equities at BNP Paribas Asset Management, said in a note.

The weighting increase will contribute to making 2019 a record year for potential inflows to the A-share market, Harvest Global Investments estimates. Goldman Sachs Group Inc. said the overall inclusion factor increase could usher in a potential US$70 billion in net buying to A shares, while T. Rowe Price Group Inc. says US$40 billion could flow from active funds, without specifying a time frame.

Fang Xinghai, deputy head of China’s securities regulator, predicted foreign capital inflows into Chinese stocks this year will double to about 600 billion yuan (US$89.76 billion). (SD-Agencies)