The Impact Of A-shares Inclusion In The MSCI Index On China's Stock Market

The most closely watched event in China's stock market in 2018 is the official inclusion of a-shares into the MSCI index.The MSCI index is a reference index compiled by Morgan Stanley capital international whic is the most widely used in the investment community to represent the performance of national and regional capital markets.In recent years,with the implementation of a series of opening policies of China's capital market,the door of China's capital market has been gradually opened.It is the common wish of the country and people to build a standardized and international capital market.Inclusion in the MSCI index is the general trend of a-share development,which will bring about various influences to China's stock market.On the basis of reading a large number of relevant literature,this paper not only describes the development of the securities market and the course of including in the MSCI index in the South Korea and Taiwan area in china,but also analysis and describes trend changes of Korea Composite Index and Taiwan weighted index after they have included in MSCI index,as well as the changes of the foreign ownership in South Korea and Taiwan area.According to the analysis,the accession of a country or region to the MSCI index does not necessarily lead to the trend of the domestic or regional market,but the MSCI index can help lift the market's sentiment and pull the market out of the doldrums.Secondly,this paper describes the development of Chinese stock market and the course of being included in the MSCI index.By using the experience of MSCI index in South Korea and Taiwan region in China,this paper analyses the probable affect on China's stock market by the MSCI index,including attracting long-term incremental funds investors,promoting the structure optimization,promoting the concept of investors and to speed the internationalization of China's securities market,etc.Finally,this paper selects the daily data of SSE composite index and the MSCI conceptual index on June 21,2016 to March 1,2019 and selects five events related to the MSCI news conducts to descriptive statistics,which finds that the volatility of the two indexes increases significantly after the events.Then calculates the abnormal average rate of return of SSE composite index and the MSCI index respectively base on the event approach in the event window period.After comparison and analysis we find that the event that MSCI declare will incorporate A shares in its index on June 21,2017 and will be formally to expand the weight of A shares in its index on March 1,2019 have obvious positive effect for both index.What's more,the positive effect to the MSCI index is greater than to SSE composite index.However,the event of MSCI's official inclusion of a-shares on June 1,2018 has no positive effect on SSE composite index and the MSCI conceptual index,which maybe influenced by the outbreak of a trade war between China with America and the event of zte prohibition in 2018.