Asian stocks were higher across the board today as the MSC Index said it would increase weightings of Chinese mainland shares in its EM index, which is followed by over USD 2 trillion of assets. This is a meaningful shift: EM stocks and FX responds to flows. Of course this reallocation will not occur all at once; that would overwhelm investors and disrupt normal market behaviours. Saudi Arabia and Argentina will enter the index with a total of 2.9% weight, but the big new is China A-Share weight will climb 5x to over 3%.
By Peter Rosenstreich
