Local stock markets yesterday breathed a sigh of relief after MSCI Inc on Tuesday decided not to include China’s A-shares in its emerging markets index.
However, analysts said the index compiler might still decide to include A-shares next year, which could crowd out funds for Taiwanese shares in regional markets.
The TAIEX ended up 0.35 percent at 8,606.37 points on light turnover of NT$71.556 billion (US$2.21 billion) after the MSCI concluded that market accessibility and capital mobility remained a concern for Chinese A-shares’ inclusion.
The benchmark index also moved higher as foreign institutional investors with large net holdings of long-position contracts in the futures market drove the spot market higher to profit in futures, dealers said.
A-shares refer to stocks listed in China’s Shanghai and Shenzhen exchanges. In general, they are only available for purchase by Chinese citizens. Foreign investment is only allowed through a tightly regulated structure known as the Qualified Foreign Institutional Investor (QFII) system.
The proposal to partially include A-shares in the MSCI Emerging Markets Index would have raised their trading volume by US$20 billion a year, aided partly by funds originally allocated to Taiwan, HSBC fund manager Claire Wei (韋音如) said.
The global index would have taken out 0.5 percentage points from the weighting for Taiwanese shares, triggering an estimated global fund outflow of US$10 billion a year, Wei said.
For now, MSCI’s hesitation has partly lifted the cloud hanging over local bourses, with institutional and retail investors staying on the sidelines due to a lack of direction, HSBC Global Asset Management vice president Steven Huang (黃軍儒) said.
“Many prefer to hold cash until after Britain’s referendum on whether to leave the EU on June 23,” Huang said.
Investors at home and abroad were also waiting for the US Federal Reserve’s announcement yesterday on its forecasts for growth, interest rates and inflation.
As of Tuesday, foreign institutional investors had net holdings of more than 50,000 long-position contracts in the futures market.
According to the Taiwan Stock Exchange, foreign institutional investors bought a net NT$3.95 billion in shares yesterday.
In comparison, mutual funds trimmed NT$613.06 million and proprietary traders cut NT$558.39 million in local shares, stock exchange data showed.
Turnover has languished below the NT$100 billion mark, as active traders lose interest in local shares due to a lack of catalysts, Huang said, adding that the availability of investment products is making the situation worse.
Fund sales, for instance, grew for three months running to NT$2.29 trillion last month, an increase of 0.53 percent from April, as they offer better risk diversifications than pure stock or bond portfolios, JPMorgan Asset Management Taiwan Ltd (摩根資產管理) said.
Additional reporting by CNA
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