Global equity investors wanting greater Chinese stock exposure without taking on active management strategies have reason to celebrate MSCI Inc.’s latest tweak to benchmark indexes. Yet the move also creates some losers.

“With China being added to the investible list of indices, tracking funds will have to rebalance their holdings to accommodate for this, which could result in an overhang for other indices in the region,” said Justin Tang, head of Asian research at United First Partners, a firm specialising in event-driven analysis.

MSCI will lift China-listed stocks in its Emerging Markets Index to 3.3 per cent by November, from the current 0.72 per cent. While billions of dollars are set to flow into so-called A-shares as a result, the weighting of Southeast Asian markets will likely drop to about 7.7 per cent from 8 per cent now, Morgan Stanley analysts Sean Gardiner and Aarti Shah wrote in a report published Friday. “A mild dilution, but overhang nonetheless.”

That may help explain why the Philippine Stock Exchange Index fell 0.8 per cent — extending its decline for a third day — while the MSCI Asia Pacific Index was up 0.2 per cent as of 3:30pm in Hong Kong. Nicky Franco, head of research for Abacus Securities Corp. in Manila, calculates the potential outflows from the Philippines at about $700 million, he wrote in a note Friday.

By contrast, the ChiNext Index of Chinese small-cap and tech stocks gained 2.1 per cent and the CSI 300 Index advanced 2.2 per cent. Once the latest inclusion is completed — it will start in May — there will be 253 large- and 168 mid-cap China shares in the index.

Another Asian emerging market that might get hit is India. The country could see outflows of up to $5 billion due to the A-share inclusion impact, Citigroup Inc. analysts led by Surendra Goyal said in a report. India’s weighting in the MSCI Emerging Markets Index could decline about 1.2 percentage point by 2025 from about 8.5 per cent now, he said.

Still, it may not be all bad news if the net result is that global investors get more interested in the broader Asian region.

“China’s greater weight is at the expense of other countries whose weights get adjusted down,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors Ltd. in Sydney. “But that’s only a short-term impact. China’s greater weight may in time attract more funds to the Asian region.”