- The global index provider FTSE Russell is expected to add mainland Chinese shares to its major benchmarks on Wednesday,Reuters reported.
- The move could push billions of dollars to the Chinese market, helping to stabilise it in the midst of its trade war with Washington.
- FTSE inclusion would initially trigger $US15 billion of foreign inflows into the market,Duan Shihua, general manager of Chinese index publisher Shanghai Changer Investment Management Consulting has estimated.
- This follows the inclusion of Chinese stock into the MSCI share index in June, and news that its index will expand China’s weighting.
Global index provider FTSE Russell is expected to add mainland Chinese shares to is major benchmarks this week after years of resisting, in a move that could push billions of dollars into the Chinese market suffering in the midst of a trade war with Washington.
A FTSE Russell decision to include the shares, which are known as A-shares, would be another boost for China, following the inclusion of its stocks in the MSCI share index in June. The incorporation of the A-shares is expected on Wednesday, Reuters reported.
The FTSE Russell is “likely” to include A-shares in its emerging markets index, after MSCI’s move to incorporate them, Managing Director of the Asia Securities Industry & Financial Markets Association (ASIFMA), Eugenie Shen, said. ASIFMA represents over 100 global financial institutions including some of the worlds biggest fund managers which use FTSE indexes as benchmarks.
FTSE inclusion would initially trigger $US15 billion of foreign inflows into the market, Duan Shihua, general manager of Chinese index publisher Shanghai Changer Investment Management Consulting has estimated.
“If you don’t add China – the world’s biggest emerging market – into your emerging market index, your benchmark would be defective, at least incomplete,” he told Reuters.
A spokesperson for FTSE Russell told Reuters that its annual country classification announcement would be released after the New York market close on Wednesday, but he would not comment on the whether A-shares would be included.
If the move is approved then the FTSE inclusion could happen within a year, a person familiar with the matter told Reuters. The change could mean that funds which track the FTSE All World and emerging market indexes would be forced to buy Chinese A-shares. FTSE may give a greater weighting to the shares than the MSCI if a “yes” decision is made, FTSE Russell CEO, Mark Makepeace said.
This comes as Chinese stocks surged on Wednesday following news that the MSCI is considering a large increase in China’s weighting of its benchmark indices in coming years.
The SSE 50 Index, made up of the largest stocks listed in Shanghai is up 2% to a two month high following the news. This could help settle troubled Chinese markets as Beijing steps up efforts to counter the destabilizing impact of Washington’s trade war.
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