(Yicai Global) Sept. 27 -- UK-based FTSE Russell will start including Chinese mainland stocks, known as A-shares, on the global provider's major benchmarks from next June.
The firm has promoted Chinese shares to Secondary Emerging market status following a classification review this month, making them eligible for inclusion on the Global Equity Index Series.
"The promotion of China A Shares to Emerging market status within FTSE GEIS 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," Fang Xinghai, vice-chairman of China Securities Regulatory Commission said in a statement. "We will work closely with FTSE Russell over the coming months to effect a smooth transition of this market into the global indexes."
The introduction of A-shares will take place in three stages, with one-fifth of stocks to be added next June. The remaining shares will be added in September 2019 and March 2020 in equal amounts. A-shares are expected to make up 5.5 percent of FTSE Emerging Index's total value after the first stage while representing 0.6 percent of the FTSE Global All Cap Index with a net passive fund inflow of USD10 billion.
The inclusion of stocks from China's mainland on the FTSE indexes and then Shanghai-London Stock Connect are major components that will link the capital markets of China and the UK together, one analyst said, adding that this will further extend the internationalization of A-share and attract more foreign capital to the market.
Global investors are very interested in Chinese assets, so the FTSE index listing will generate more funds compared to listing in the MSCI index, though capital flows will be less concentrated, Citic Securities Chief Market Strategist Liu Dezhong said.
Editor: William Clegg