After three years of rejection, MSCI has finally accepted China A-shares into its bellwether emerging markets index.

The move will be gradual, however, and broader demand for A-shares seems already priced in. We note that the best rallies in A-shares have started with much lower premiums to H-shares. (The bottom panel below is a proxy for such premium, which is directly observable here.)

Conclusions? China A-shares will play an increasingly important role in global markets. But we don’t detect a classic asset-allocation opportunity at this time.