Investing

MSCI Inclusion of Mainland China Means Massive Buying for Top Stocks

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For years the debate has raged. When will MSCI add mainland Chinese stocks to its venerable index? That day has finally come, and MSCI, which stands for Morgan Stanley Capital International, has made the long-expected move. MSCI’s indexes cover thousands of stocks under various categories and are used as benchmarks to measure the performance of portfolios.

By making the decision to add the stocks in mainland China, a huge flow of cash is headed for the top companies. In fact, adding mainland China will increase the weighting of Chinese stocks in the MSCI Emerging Markets Index from roughly 26% to more than 40% with full inclusion. The mainland China stock market totals more than $6 trillion in the combined Shenzhen and Shanghai indexes.

Top Wall Street analysts feel that the biggest winners are among the biggest stocks in China. These 10 top companies are ones that should see some the biggest flow of cash into their shares.

  1. Alibaba Group Holding Ltd. (NYSE: BABA)
  2. Baidu Inc. (NASDAQ: BIDU)
  3. JD.com Inc. (NYSE: JD)
  4. NetEase Inc. (NASDAQ: NTES)
  5. Ctrip.com International Ltd. (NASDAQ: CTRP)
  6. Qihoo 360 Technology Co. Ltd. (NASDAQ: QIHU)
  7. New Oriental Education and Technology Group (NYSE: EDU)
  8. Vipshop Holdings Ltd. (NYSE: VIP)
  9. 58.com Inc. (NYSE: WUBA)
  10. TAL Education Group (NYSE: TAL)

Needless to say, this is now out and everybody knows, and many companies that track indexes will be adding the shares to their portfolios. In an effort to maintain stability, MSCI said it plans to add 222 China A Large Cap stocks to the benchmark emerging markets index on a gradual basis beginning next year. So while investors may not see a gigantic initial spike, rest assured this is a huge move, and it changes the playing field on a global basis in a big way.

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