Some ETF investors believe it could be fourth time lucky for Chinese equities as they seek entry into MSCI Inc.’s benchmark indexes next week.

The KraneShares Bosera MSCI China A ETF (KBA), saw $49.5 million of inflows in May, its best month ever, according to data compiled by Bloomberg. So far in June, $67.5 million has poured into China equity funds listed in the U.S., compared with $100 million of outflows during the first five months of the year, the data show.

China will find out on June 20 if members of its $7 trillion equity market will be represented in MSCI’s suite of global indexes. The prize is significant — MSCI’s emerging markets gauge is tracked by global money managers and acceptance may broaden the nation’s investor base by triggering inflows from abroad.

"The probability of MSCI inclusion gets higher and higher," said Karine Hirn, partner at East Capital Asset Management in Hong Kong. “This time, due to changes limiting the stocks to just those accessible through stock connect and not suspended stocks, it should happen." 

Only 169 mainland China-listed companies will be considered for inclusion into the benchmarks this year, down from 448 in 2016. China A shares that have been halted for more than 50 days in the past 12 months won’t be eligible, according to MSCI.

"In the latest consultation document, the tone and tenor exhibits a much stronger awareness of the onshore market, and we haven’t seen that in past years," said Brendan Ahern, chief investment officer at Krane Fund Advisors LLC in New York. “We are opening up China — we have been telling that story to U.S. investors.”

Despite the enthusiasm, Goldman Sachs Group Inc. said in a report that the odds of A shares being included by MSCI have fallen to 60 percent, down from 70 percent last year. The index provider has denied entry to China’s domestic shares three times, saying in a statement last year that policy makers needed to improve accessibility.

One reason for the slimmer odds is that the country’s Qualified Foreign Institutional Investor program, which carries a 20 percent monthly capital repatriation maximum, effectively limits the size and timeliness of portfolio flows, the New York-based bank said.

Another barrier is a pre-approval requirement for investment products that use A shares as an underlying, according to Goldman.

Traders have driven up short interest in three of the biggest U.S.-listed China ETFs in a sign they may be looking for protection in case China stocks are rejected again.

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