The influential index business, which produces indices tracked by scores of investment firms and used as reference points for fund and wealth managers, is not yet including Chinese mainland equities in a flagship emerging markets benchmark.

China’s hopes of taking another step towards become fully integrated into the global investment system were delayed yesterday after index provider MSCI pushed back including mainland A shares into its flagship benchmark of emerging market equities. By contrast, MSCI said shares of Pakistan will be included in the index, sending equities of that country upwards.

MSCI, aka Morgan Stanley Capital International, decided to delay inclusion of China A shares in the MSCI Emerging Markets Index because, among other factors, state restrictions on share transactions were a hurdle. More broadly, MSCI made encouraging noises about the Asian giant’s progress.

The move will be disappointing to China but, as wealth managers said in their reactions, not entirely unexpected; it followed a period last year and into the start of 2016 that was marked by market turmoil. Fears of deceleration to Chinese growth, and pressures on its financial system, have weighed on global sentiment.

“The decision by MSCI to delay the inclusion of Chinese A shares into their benchmarks is, naturally, mildly disappointing for us and for other investors in the Chinese stock market,” Anthony Cragg, senior portfolio manager at Wells Fargo China Equity Fund, said.

Winnie Chiu, senior portfolio manager, Indosuez Wealth Management, said: “The non-inclusion of A-shares in the MSCI emerging markets index may result in a short-term negative psychological impact. However, this should not affect institutional investors’ opinions towards individual mainland companies. Their confidence towards A-shares should stem from progress made in business development, earnings growth prospects, corporate governance, and from the fact that more companies are accessible to external shareholders.

“Overseas investors have so far been underweighting the China market. The non-inclusion should not cause a major liquidity outflow at least for this current juncture,” Chiu added.

Inclusion into the MSCI Emerging Markets Index would mean large institutional investors, such as pension funds, life insurers and retail asset managers, could own such shares, increasing their liquidity. Such investors understandably seek convenient exposure to the world’s second-largest economy, even though its equity market, relatively speaking, is small (compared to that of the US, for example).

“Over recent months, Chinese authorities have introduced significant improvements in the accessibility of the China A shares market for global investors. In our 2016 consultation, investors recognised the actions taken to further open the China A shares market and highlighted that the topic of beneficial ownership has been satisfactorily addressed,” MSCI said in a statement yesterday.