China's markets need lighter-touch regulation to be included in MSCI

CHINA suffered a setback earlier this week when the MSCI decided to delay yet again the inclusion of its domestic A-share market into the key Emerging Markets Index. In the run-up to the announcement, analysts had been broadly optimistic, with Goldman Sachs for example giving it a 70 per cent chance.

Expectations had run high on the potential inflow which could help in the long run to stabilise a notoriously volatile stock market dominated by retail investors.  At an initial 5 per cent inclusion, the A-share market would get an index weight of one per cent. HSBC Global Research  estimates an initial inflow of roughly US$4 billion to US$6 billion of passive funds, and an expected US$16 bi…