Strange session for China’s Shenzhen, Shanghai

Investors watch a digital screen displaying the prices of China’s stock market in Hangzhou, Zhejiang province of China. It’s a mixed day overseas. Europe is down modestly as Greece negotiations drag on and Germany enters correction territory. The DAX is down 10 percent from its April 10 historic high.

But it’s been a strange session overnight in China, with the Shenzhen (largely tech stocks) falling 1.7 percent, while the Shanghai Composite (more financials, energy, and telecom) is up 2.2 percent.

It’s about time. Small cap tech stocks as represented best on the Shenzen have more than doubled this year.

China markets this year:

• Shanghai: up 58 percent
• Shenzhen: up 112 percent

As I noted last year, the world’s largest indexing company, MSCI, will announce tomorrow whether it will include domestic mainland stocks in its indices. This is important for one simple reason: indexers rule the investment world.

Many investors are increasingly investing through indices, most of which are used in the 1,600 ETFs that are traded every day in the United States. Adding more China stocks to indexes essentially forces investors to hold more exposure to China.