No. 657 - Benchmark effects from the inclusion of Chinese A-shares in the MSCI EM index

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by Stefano Antonelli, Flavia Corneli, Fabrizio Ferriani and Andrea GazzaniDecember 2021

The paper examines portfolio choices and net subscriptions trends in funds investing in emerging economies. The objective of the study is to analyse the impact on international capital movements resulting from the gradual inclusion of renminbi-denominated Chinese shares (A-shares) in the MSCI Emerging Markets Index.

The inclusion of A-shares in the MSCI index has increased the geographic concentration of investment fund portfolios and fostered a shift toward Chinese financial assets at the expense of other emerging economies. In addition, this inclusion has led to an increase in capital flows intermediated by investment funds to China, which is greater than would have been assumed using the domestic and global variables commonly employed in the literature.

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