MSCI’s CEO Henry Fernandez defended the global index provider’s inclusion of A-shares despite criticism from U.S. senator Marco Rubio about various concerns including capital injection to companies that have been federally blacklisted and accused of human rights abuse.
«Currently there is no U.S. law or regulation that prohibits an index company from creating an index containing China A securities or U.S. investors from trading in the China A market,» MSCI’s Fernandez said in a letter, according to «Bloomberg». «China A-shares are open to buying and selling by foreign investors.»
Whilst the MSCI letter does acknowledge China’s different accounting standards and identifies it as an authoritarian regime, it notes that considerations for index inclusion were nonetheless not based on «subjective judgment regarding the company’s intrinsic value or basic practices,» but on standardized factors such as a firm's size and the liquidity of its shares.
Inclusion of Human Rights Abusers «Deeply Troubling»
MSCI’s response follows Florida Republican Rubio’s public letter demanding an explanation for adding hundreds of Chinese stocks to its benchmark emerging market index last year and increasing their weighting this year. Rubio specifically underlined the risk posed to U.S. investors and pensioners as well as concerns about the inclusion of companies that have been accused of human rights abuse.
«It is deeply troubling that a company like Hikvision, which is complicit in China’s human rights abuses in Xinjiang and is on the Commerce Department’s banned Entity List, can get access to the U.S. capital markets through an MSCI index,» Rubio said in the statement on Monday. «I will continue to work with my colleagues in a bipartisan fashion to ensure that U.S. investors and pensioners are not at risk.»
A group of bipartisan lawyers led by Rubio has pushed to tighten against Chinese companies through greater restraints, scrutiny and potential delistings should they fail to comply with U.S. accounting practices and other laws.
