• The Shanghai Composite Index rebounded on Wednesday.

The Shanghai Composite Index rebounded on Wednesday. (Photo : Getty Images)

China has yet again received a "no" from the American index provider MSCI Inc. after the company deemed local Chinese shares insufficient to add to their emerging market index.

According to BBC News, the inclusion of China's domestic shares in the emerging market index could have been beneficial for Beijing's plan to attract foreign capital by opening up its financial markets.

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The bad news was posted on the MSCI's official website, which explained that it was merely "delaying" the inclusion of domestic shares in China labeled "China A."

MSCI's Decision

"There have been significant steps toward the eventual inclusion of China A shares in the MSCI Emerging Markets Index," MSCI Managing Director and Global Head of Research Remy Briand said in the document. "They demonstrate a clear commitment by the Chinese authorities to bring the accessibility of the China A shares market closer to international standards."

However, Briand noted that while they see the efforts the Chinese government is exerting, they believe that it's still not the right time to include China's domestic shares into the emerging market index.

"We look forward to the continuation of policy momentum in addressing the remaining accessibility issues," he added, noting that they still wish to see improvements in terms of the global accessibility of the shares.

While it may be surprising to China, some analysts said that the decision was a bit expected.

"It really was fifty-fifty regarding the inclusion," Fidelity Investment's Catherine Yeung explained to BBC. "What's important to note is that while we have seen some significant improvements in terms of how foreign investors access domestic Chinese stocks, [but regarding] the criteria that was set last year, a lot of it still needs to be fulfilled."

Investors' Reaction

Apparently, the news about MSCI's decision did not hinder investors from betting on China as the country's stock market saw its highest improvement in two weeks, Reuters reported.

"The blue-chip CSI300 index rose 1.3 percent, to 3,116.37, while the Shanghai Composite Index gained 1.6 percent, to 2,887.21 points," the report read.

According to the outlet, the MSCI's decision is now considered the past, with investors bringing their focus on China's struggling economy which they see as a bigger threat to their investments.

"Regarding MSCI, most retail investors in China don't really care. And for institutions, their expectations of an inclusion have been greatly reduced since the market crisis last year," Shenzhen-based Appleridge Capital Management Co. Chairman Charles Wang told Reuters.

"Failing to be included this time is not necessarily a bad thing. It can prod the government to improve market mechanisms and push reforms," he added.