HONG KONG (MarketWatch) — Wednesday could be huge for Chinese stocks.

On that day, about four hours before Shanghai opens for trade, MSCI Inc. MSCI, +1.35% will announce whether it will welcome China’s top yuan-denominated stocks into its extremely influential Emerging Markets Index 891800, , tracked by a mountain of roughly $1.7 trillion in assets worldwide.

Such a move would be expected to ignite a significant rally in Shanghai blue chips, and a recent Wall Street Journal report cited major funds such as those of Vanguard Group Inc. planning to purchase Chinese equities ahead of the MSCI decision, which is due to be revealed Tuesday at about 5:30 p.m. U.S. Eastern time (Wednesday 5:30 a.m. in Shanghai) on the financial company’s website.

Hong Kong-listed shares of Chinese companies — known as “H-shares” — are already a sizeable presence in the MSCI EM Index. Rival FTSE Group (owned by the London Stock Exchange LSE, -2.29% LDNXF, +1.13% ) recently added the mainland-listed stocks — known as “A-shares” — into transitional global indexes, and may add them to its benchmark EM index this September, according to HSBC.

The possible MSCI move has been making big headlines in China’s news media, but that said, many analysts are not so sure the index compiler will take the plunge into Chinese equities this week, suggesting it will wait a little longer for the country’s financial reforms to solidify further.

Now or later?

Among analysts closely following Chinese stocks, many think inclusion in the MSCI EM Index will happen, even if not right away.

Last June, some investors had pushed back against the addition of A-shares in the benchmark, arguing that China still restricted market access. Since then, however, Chinese markets have opened further to the world, including through the launch of the milestone Hong Kong-Shanghai Stock Connect scheme — which allows foreign retail investors to directly buy mainland Chinese equities for the first time — and through the mutual recognition of Hong Kong funds and their mainland peers.

But despite such liberalizations, Hong Kong-based China Forward Capital Group’s founder and chief investment officer, Qi Wang, thinks MSCI will likely wait a little longer before including the A-shares.

“There could be more dramatic policy changes in the second half of 2015, beyond the already announced mutual recognition” of funds, he told MarketWatch late last week. “This may prompt MSCI to delay the decision to later this year in order to take a more comprehensive view.”

Ilya Feygin, managing director at New York-based broker WallachBeth Capital, sees “a greater than 80% chance” that China’s A-shares will join the MSCI indices by its June 2016 index review at the latest, though Wednesday’s announcement might not be one of immediate inclusion of Chinese stocks.

“The upcoming announcement June 9th will probably simply make some forward-looking statement to that effect,” he said in emailed comments for this report.

But Feygin does see the eventual inclusion as highly likely, given the rapid growth in mainland China’s stock-market capitalization, as well as the Hong Kong-Shanghai Stock Connect scheme and the recent move by FTSE.

“The importance of China by market cap and economic contribution can’t be ignored, and their inclusion has been delayed by seeking consensus among the top 50 asset managers,” Feygin said.

More must be done

Among those skeptical of an immediate inclusion of A-shares in the MSCI EM Index, some cite the need for a further opening for the Chinese markets before such a move would be practical for MSCI.

“It’s still hard for A-shares to join MSCI’s global benchmarks in the short term,” Guotai Junan Securities, one of China’s largest brokerage firms, said in a note last Wednesday.

Part of the problem is that access for institutional investors — whether through the Stock Connect or via two older programs, the QFII (Qualified Foreign Institutional Investor) and RQFII (Renminbi Qualified Foreign Institutional Investor) schemes — is still insufficient.

“To quicken the process [of joining MSCI indices], China may speed up the opening of capital markets,” Guotai Junan analysts led by Qiao Yongyuan said in the note.

They said such moves by Chinese regulators would likely include larger quotas for the QFII and RQFII programs, as well as the launch of a second “Stock Connect,” this time linking Hong Kong’s bourse with the smaller Shenzhen share market. Likewise, the trading-volume limits for the Hong Kong-Shanghai Stock Connect may also be raised.

China Forward Capital’s Qi Wang said limits to foreign shareholdings in Chinese companies may also be loosened.

“We think the foreign ownership of China A-shares will continue to increase from the current low base of only 3%,” he said. “The increasing foreign institutional ownership of A-shares will undoubtedly change the rules of the game for A-share trading.”

Such moves have already been hinted at by the nation’s financial regulator, the China Securities Regulatory Commission, which has cited a need to improve the global competitiveness of Chinese markets.

If you add them, they will rally

Regardless of whether MSCI includes China stocks this week or sometime in the months ahead, the move’s impact will likely be large indeed.

Currently, Hong Kong-listed H-shares of mainland Chinese companies represent about 25% of the MSCI EM Index. If the A-shares join, billions of dollars in funds tracking the benchmark would rush into Shanghai to match the new composition of the index.

According to an estimate by HSBC last Thursday, A-shares could eventually constitute 23% of the MSCI EM Index once they “are fully available to international investors,” while for the FTSE EM Index VFEM, -1.42% VWO, -0.79% , Chinese shares could potentially amount to 27% of the total in that benchmark.

Full inclusion in both indexes could result in passive investment flows “of almost $50 billion,” and the reaction from active investors could drive that sum to as high as $330 billion, HSBC said.