* CSI300 -0.5 pct; SSEC -0.5 pct; HSI +0.2 pct
* MSCI decides not to include mainland stocks into its indexes
* China market faces a fresh wave of IPOs
By Samuel Shen and Pete Sweeney
SHANGHAI, June 10 (Reuters) - China stocks fell on Wednesday morning, on investor disillusionment over MSCI’s decision not to include mainland stocks into its global index and ahead of a tidal wave of new listings.
U.S. index publisher MSCI Inc said it would hold off including China-listed shares into its emerging market index due to quota, liquidity and ownership issues, but will work with Chinese regulators toward an eventual inclusion.
The news triggered an early-morning sell-off, knocking the main indexes down more than 2 percent at one point, but an ensuing burst of fresh buying helped stocks recover most of their losses.
By midday, both the CSI300 Index index and the Shanghai Composite Index were down only 0.5 percent, after managing to nudge into positive territory earlier.
Shenzhen stocks were strong, on expectation that Beijing would accelerate reforms to allow easier foreign access to the city’s bourse.
Goldman Sachs pointed out that restricted access to Shenzhen-listed stocks for overseas investors was a key obstacle to overcome before MSCI includes Chinese stocks into its indexes.
Hong Kong stocks were also firmer, as some analysts viewed MSCI’s thumbs-down on mainland stocks as being positive to Hong Kong shares.
A damper mood on the mainland was partly countered by a 44 percent debut surge in shares of energy giant China National Nuclear Power Co Ltd (CNNPC).
But a score of mainland blue chips previously identified by HSBC as potentially being the biggest beneficiaries from an MSCI inclusion, were hit hard.
CRRC Corp Ltd slumped 8.3 percent, China Railway Group tumbled 4.4 percent, Bank of China fell 3 percent and Bank of Communications was down 3.2 percent.
The CSI300 banking index fell 1.5 percent. The sector had a strong rally recently as investors bet banking shares would benefit the most from an inclusion into MSCI indexes.
“This time, China stocks are not included. But they will be sooner or later,” Shenwan Hongyuan Securities Co said in a research note.
“The result is within market expectations, so we think the market can digest the news in a rational manner.”
The view was echoed by UBS strategist Steve Yang, who said that despite MSCI’s decision, internationalisation of China’s stock market had already started, as “an increasing number of overseas funds have already considered including them in their portfolios.”
At the end of the morning session, the CSI300 stood at 5,291.99 points, while the SSEC traded at 5,090.71 points.
The Hang Seng index added 0.2 percent, to 27,045.50 points, and the Hong Kong China Enterprises Index lost 0.2 percent, to 13,837.19. (Editing by Jacqueline Wong)