China's equity market was paring losses after a steep tumble, after MSCI declined to include mainland shares in its indices — a decision that will delay an influx of foreign inflows estimated in the tens of billions of dollars.
MSCI-tracked funds are worth nearly $1.7tn. If the index provider had opted to include Chinese shares, global funds would purchase between $20bn and $50bn of Shanghai and Shenzhen equities, according to estimates from MSCI and HSBC.
Numerous analysts pointed out it's a question of when Chinese shares are included, not if. But some of the rally in recent weeks was based on hopes for an imminent surge in foreign inflows — following more than $6bn in the last two weeks — so the feeling on Wednesday is one of disappointment.