PleasereadthedisclaimerattheendofthereportSecuritiesResearchReport//QuantitativeStrategy&AssetsAllocation/QuantitativeStrategyQuantitativeAnalysisofHotspotacrosstheMarket(5):Progressofinternationalstockindices’inclusionofAsharesanditsmarginalinfluence12Oct2018CITICSResearchGUShengxiTel:010-60836748Email:gushengxi@citics.comPracticinglicense:S1010517110001LIUFangTel:010-60836736Email:fangliu@citics.comPracticinglicense:S1010513080004ZHAOWenrongTel:010-60836759Email:zhaowenrong@citics.comPracticinglicense:S1010512070002WANGZhaoyuTel:021-20262110Email:wangzhaoyu@citics.comPracticinglicense:S1010514080008LIHaiqiangTel:0755-23835401Email:lihaiqiang@citics.comPracticinglicense:S1010512010001InvestmentHighlights:Investmentfocus:ImplicationsoftheinclusionofAsharesinmajorinternationalstockindices.1)Ashareshavebecomeanimportantallocationforglobalinvestors.MainlandChinahasthethird-largeststockmarketbymarketcap.Ata100%fullinclusionfactor,Asharesareexpectedtorepresentanaggregateweightof17%inMSCIindices.2)Fromalong-termperspective,Ashareallocationcanhelpexpandtheefficientfrontierofinvestmentsforforeigninvestors.China’sAshareshaverelativelylowcorrelationwithmajordevelopedcountry/EMindices.AccordingtoMSCIresearch,assumingportfoliovolatilityisfixed,a5%inclusionofAshareswillboostexpectedreturnsby20bpsanda100%inclusionwillboostexpectedreturnsby80-100bps.3)Majorinternationalstockindexproviders’movestoincludeAsharesintheirindicesareanindicationofoverseasinstitutionalinvestors’viewsonassetallocation.TheMSCIinclusion,theresultofvotingbyglobalmainstreaminstitutionalinvestors,showstheirrecognitionofAsharesasworthylong-terminvestments.Forforeigninvestors,nowisagoodtimetobuyondips.Inthisnote,wehavecarriedoutquantitativeanalysisofmajormilestonesinfutureforinclusionofAsharesintorelevantinternationalstockindicestofigureouttheimpactonrelevantsectorsandthoseAsharesbylookingatthoseAshares’microdata.TimetableforforeignallocationtoAshares:2Q2019,3Q2019and2Q2020areimportantpointsintime.1)B...
