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A-share inclusion on global benchmarks a boon to int’l investors :
Economic Watch
BEIJING, Sept. 30, 2018 (BSS/Xinhua) – With the inclusion of China’s A-
shares into key global benchmark indices, international investors will enjoy
greater access to the country’s equity market and share its growth dividends.
On Thursday, global index provider FTSE Russell decided to add the Chinese
mainland’s yuan-denominated A-shares into its global equity benchmarks in
phases, starting from June 2019.
The decision reflects the ongoing progress made by China toward market
reforms and increased access for global investors, the company said in a
statement on its website.
Upon completion of an initial phase next June, A-shares will constitute
5.5 percent of the total FTSE Emerging Index, representing net passive
inflows of 10 billion U.S. dollars worth of assets under management.
This move comes just days after FTSE Russell’s rival MSCI announced the
launch of a consultation on a further weight increase of A-shares after the
MSCI entry in June.
MSCI, which has included 236 China large-cap A-shares on its MSCI Emerging
Markets Index, said in a statement that it has proposed to increase the
weighting from 5 percent to 20 percent.
The benchmark indices are tracked by institutional investors to determine
their portfolios, and the inclusions will lead passive fund followers of the
benchmarks into the A-share market.
A steady Chinese economy with a positive outlook and further opening-up of
the financial sector mean that the attraction of the capital market will only
become stronger in the future and that the chance will be greater for global
investors to share the market’s development dividends, experts said.
Mark Makepeace, CEO of FTSE Russell, said global investors seek
diversification and look at the A-share market as a market that has
underperformed for some time. “Now it’s a good time (to invest in the
market),” he said.
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“There are 25 trillion dollars that follow FTSE Russell and MSCI global
equity benchmarks. We believe that China, and particularly the A-share
market, have the potential to become more than 10 percent of those global
portfolios. That will equate to 2.5 trillion dollars of money to flow into
China over the next 5 to 10 years,” Makepeace said in an exclusive interview
with Xinhua.
The FTSE Russell inclusion is “an important next step in the development
of our capital markets and reflects the long-term reforms that have been
implemented over the past few years,” said Fang Xinghai, vice chairman of the
China Securities Regulatory Commission.
To further open up the capital market, China has been allowing eligible
foreign individual investors to trade its A-shares since Sept. 15.
Following the launch of the Shanghai- and Shenzhen-Hong Kong stock links,
which make it easier for foreign investors to buy A-shares, the country is
expected to unveil a similar program between Shanghai and London later this
year.
Growing foreign investment inflows have marked a vote of confidence for
China’s development outlook, which was underpinned by a faster shift in the
country’s growth drivers, improving development quality and stabilizing the
equity market, Fang said.
Yi Gang, governor of the People’s Bank of China, the central bank, said
the country should continue with efforts to expand the opening-up of the
financial sector in a proactive and orderly manner.
In a book published to mark the 20th anniversary of the Chinese Economists
50 Forum, an academic organization, Yi urged for the further easing of
restrictions on foreign equity, forms of establishment and qualifications of
foreign shareholders of financial institutions.
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