China blue-chips at 18-month high, MSCI talks up A-shares

SHANGHAI (Reuters) - China's blue-chip index closed at its highest in over a year on Monday, boosted by news of index provider MSCI saying it could substantially raise the future weighting of China 'A' shares in its emerging markets benchmark.

The Shanghai SE 50 Index, an index tracking the 50 most representative blue-chips on the Shanghai Stock Exchange, advanced 0.6 percent to an 18-month high. The index has gained 11.2 percent in 2017, versus a gain of 2.6 percent in the benchmark SSEC.

The blue-chip CSI300 index rose 1.3 percent, to 3,668.09 points, while the Shanghai Composite Index ticked up 0.9 percent to 3,185.44 points.

Shanghai Securities News reported MSCI Inc Chief Executive Henry Fernandez saying MSCI could raise the future weighting of China 'A' shares in its Emerging Markets Index, potentially adding 195 mid-sized stocks.

MSCI's decision to add 222 China-listed large-cap stocks to its Emerging Markets Index (EMI), tracked by around $1.6 trillion, has already fuelled a blue-chip buying spree on the mainland.

"For now we are optimistic about the 'A' share market, which has been picking up recently, aided by better policy and liquidity conditions," Haitong Securities wrote in a report.

Listed companies in the 'A' share market are also expected to record rapid profit growth in the second quarter and for the full year, the brokerage added.

Sectors rallied across the board. The top performing real estate sector jumped 4.6 percent to a near seven-month high, led by bellwether China Vanke which soared 10 percent for the second straight session.

The market showed scant reaction to news that China imposed a penalty of nearly 700 million yuan ($102.30 million) on a Russian-controlled high-frequency trading firm on Friday for futures market manipulation.

($1 = 6.8423 Chinese yuan renminbi)

(Reporting by Luoyan Liu and John Ruwitch; Editing by Eric Meijer & Shri Navaratnam)