Photo/Shetuwang

Aug. 28 (NBD) -- The Chinese A-share market soared and net northbound capital inflows via the Stock Connect programs reached a single-day peak year to date on Tuesday (August 27), when leading index provider MSCI (NYSE: MSCI) further increased the weight of China A-shares in its indexes.

National Business Daily (NBD) noticed that at the end of Tuesday's trading session, China A-shares witnessed a rise of 860 billion yuan (120 billion U.S. dollars) in its aggregate market capitalization.

On the day, the Shanghai Composite Index closed 1.35 percent higher, standing at over 2,900 points, and the Shenzhen Component Index added 1.86 percent to 9443.18 points. The ChiNext Index, a NASDAQ-style board of the Shenzhen Stock Exchange, hiked by 1.71 percent to 1628.12 points. On Wednesday, the three indexes edged down. 

MSCI's latest move triggers rush purchase in two ETFs tracking Chinese equities

MSCI on Tuesday raised the percentage of all Chinese stocks in its indexes from 10 percent to 15 percent, the second stage of its three-step plan to quadruple the inclusion factor of all China A Large Cap shares from 5 percent to 20 percent.

In a recent report, MSCI stated that China is the second-largest economy in the world, accounting for 16 percent of global GDP, and based on the IMF's latest forecasts, the oriental nation's contribution to global GDP is set to grow to 19 percent by 2024. However, the country merely represented less than 4 percent of global equity benchmarks at the end of 2018, which indicated that Chinese stocks were underweight currently.

Boosted by MSCI's latest move, foreign investors rushed to buy two exchange-traded funds (ETFs) - iShares China Large-Cap ETF (FXI) and iShares MSCI China ETF (NASDAQ:MCHI).

Based on Bloomberg Terminal, the last-minute trading volume of iShares China Large-Cap ETF (FXI), the largest US-listed exchange traded funds dedicated to Chinese equities, on Tuesday ballooned by 4.76 times to 2,040,000 shares from the previous minute, while that of iShares MSCI China ETF witnessed a five-fold rise to 175,000 shares.

Net northbound capital inflow hit single-day new high year to date

"The increase of Chinese A-shares' weight in the MSCI indexes will bring more capital into the A-share market, even the H-shares," analyst at Springwaters Financial Securities Limited Ceng Zhiyong said to NBD.

NBD noticed that the net capital inflow into China A-shares on Tuesday via stock connect programs between the mainland and Hong Kong bourses hit a single-day high so far this year, rocketing to 11.7 billion yuan, according to Wind's statistics. The A-share market saw a net inflow of 7.37 billion yuan through Shanghai-Hong Kong Stock Connect and 4.39 billion yuan via Shenzhen-Hong Kong Stock Connect. 

As for Chinese stocks favored by foreign capital, nine saw sizeable net capital inflows on Tuesday, and Wuliangye, Wanhua Chemical and Ping An Bank drew 713 million yuan, 393 million yuan, and 381 million yuan, respectively. 

NBD noticed that in August, 70 stocks each attracted more than 100 million yuan of additional capital injection via the Stock Connect programs, among which 10 including Ping An Bank and Wuliangye received over 500 million yuan. 

Email: lansuying@nbd.com.cn