China A connect - intro
Since the launch of our flagship MSCI China and MSCI China A Indexes, and inclusion of China A shares in the MSCI Emerging Markets (EM) Index in 2018, the weight of China in MSCI EM increased from 18% at the end of 2009 to 34% as of August 19, 2021. Our latest index, the MSCI China A 50 Connect Index, follows an innovative approach by selecting 50 of the largest China A shares investable through the Stock Connect and ensuring diversified sector allocation and balanced representation of the broader China A market . It is designed to enable international and domestic investors to track China’s sector leaders, get exposure to leading stocks in key sectors, and serve as the basis for index-linked ETFs and ETNs and other financial products.
China A connect - content
Capture growth from the world’s second largest economy
The MSCI China A 50 Connect Index seeks to represent the performance of the top 50 large cap China A shares using a sector-neutral approach. Built from our flagship MSCI China A Index (the parent index), it utilizes all our investability requirements (see MSCI Global Investable Market Indexes (PDF, 5.8 MB) (opens in a new tab) methodology) and, through the Stock Connect program,1 may be used to serve as a proxy for the full market opportunity including China’s new economy. With at least two stocks from each sector, it is designed to reflect broad diversification across the Chinese economy. The index seeks to achieve more balanced sector exposure compared with a simple top 50 approach by avoiding overweighting of Financial or Consumer Staples.
Explore our transparent, rules-based index methodology
The Index focuses on larger companies with high index weights, targeting securities with a high level of liquidity. It also seeks broad sector exposure for greater diversification, and high correlation and low tracking error with market benchmarks, such as the MSCI China A Index.
The MSCI China A 50 Connect Index
Step 1: We first select the two largest securities from each of the 11 GICS® sectors–corresponding to the index weights of the MSCI China A Index.
Step 2: The remaining 28 securities are selected from the parent index by index weight until the total count reaches 50. We use a selection buffer of 15 securities designed to mitigate index turnover. Finally, the selected securities are weighted based on the free-float market cap weights of the parent index and reflect the sector weight allocation of the parent index.
Start With MSCI China A (Parent Index)
Select 22 large cap stocks, two from each sector with biggest index weight
Select remaining 28 stocks from the large cap universe with heighest index wights
Balanced security representation from 11 GICS sectors1
Apply market cap weight within sectors and normalize sector wights to equal those of parent index
- Diversified wighting
- Quarterly rebalance
- Turnover mitigation
Coinciding with the Quarterly Index Reviews of the parent index, the MSCI China A 50 Connect Index will be rebalanced on the last business day of February, May, August and November.
Explore the MSCI China A 50 Connect Index - Episode 1
Index Licensing for Derivatives
1The Stock Connect program facilitates trading and clearing between mainland China’s (Shanghai and Shenzhen) and Hong Kong’s securities markets. Northbound Trading enables international investors to trade eligible securities in mainland China through the Hong Kong Exchange, while Southbound Trading, affords mainland investors access to the opportunity set.