June 22, 2017 / 7:28 AM / in a year

China blue-chips end at 18-mth high on MSCI nod, but late-selling dampens mood

SHANGHAI, June 22 (Reuters) - China’s blue-chips extended gains on Thursday to hit a fresh 18-month high on excitement over MSCI’s decision to include mainland shares in a key index, but most of the gains were erased in late trade as investors took profits and as the weakness in small-cap stocks dampened sentiment.

The blue-chip CSI300 index rose 0.1 percent, to 3,590.34 points, while the Shanghai Composite Index lost 0.3 percent to 3,147.45 points.

However, interest in blue-chips sapped demand for small-caps, which has already waned sharply. The start-up board ChiNext dropped 1.4 percent.

Investors continued to pile into stocks that will potentially benefit from inclusion in the MSCI Emerging Markets Index (EMI).

The U.S. index provider said on Tuesday it would add 222 China-listed stocks to its Emerging Markets Index (EMI), tracked by around $1.6 trillion, with the inclusion process starting June 2018.

The MSCI inclusion “paves the way for global capital inflows into China’s A-shares,” rating agency Moody’s said in a report on Wednesday, projecting roughly $11 billion in near-term fund inflows into mainland stocks from funds benchmarked to EMI.

Hong Hao, head of research at BOCOM International, said that the inclusion “bodes well for large-cap blue chips”, and enhances investor preference for these stocks amid a slowing Chinese economy.

The CSI300 Banking subindex jumped 1.8 percent, while the consumer sector took a breather after surging in the previous session. The sectors would represent the biggest weightings of China stocks in the MSCI EMI.

Shares in Wanda Film, a listed arm of Chinese conglomerate Wanda Group, halted trading after tumbling nearly 10 percent on speculation about Wanda Group.

The group denied as “malicious speculation” rumours that banks had ordered sale of its bonds, and said it was operating normally. (Reporting by Luoyan Liu and John Ruwitch; Editing by Shri Navaratnam)

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