China's ADRs rise ahead of MSCI inclusion

By Tariro Mzezewa

NEW YORK (Reuters) - China company stocks that trade on U.S.-listed exchanges were mostly higher on Thursday as investors awaited index provider MSCI's announcement to add some well-known company stocks to its emerging market indexes.

At 5 p.m. EST, MSCI is scheduled to announce that it will add foreign-listed Chinese shares to one of its emerging market indexes beginning on Dec. 1.

The entrants are likely to include China's hugely popular Internet companies Alibaba Group Holding Ltd and Baidu Inc, two of the largest U.S.-traded Chinese equities.

Indexes tracking overseas-listed shares, known as American Depository Receipts (ADR), traded higher on the day. The Bank of New York Mellon index of Chinese ADRs rose 1.6 percent while the ARCA China Index was up 1.7 percent with only seven of 26 stocks in negative territory.

Chinese shares have been on a wild ride throughout 2015. After heavy selling of stocks through the summer, China's major indexes have rebounded, with the Shanghai Shenzhen CSI300 index and the Shanghai Composite Index touching near two-month highs in early November.

In recent days, shares have weakened, but some analysts expect key shares to rebound once MSCI adds popular names in its emerging-markets indexes. Lack of transparency has kept China "A" shares, which trade in mainland China, from MSCI's major world indexes.

"This inclusion will be more reflective of the Chinese opportunity set with big IT and consumer names being added. That shows the shift in the center of gravity from old China to new China," said Charlie Wilson, portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico. The addition by MSCI could add new holdings to $2.7 billion in exchange-traded funds globally that track the MSCI China Index later this month and another $52 billion that track MSCI's suite of emerging-market indexes, according to Morningstar Inc. More than $5 billion in money from passive funds will move as a result of the changes affecting China and other countries, according to a Nov. 6 estimate by Credit Suisse.

(Reporting by Tariro Mzezewa, additional reporting by Trevor Hunnicutt; editing by G Crosse)

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