S&P Dow Jones to in­clude A shares

China Daily (Hong Kong) - - BUSINESS - By WANG YANFEI wangyan­[email protected]­nadaily.com.cn

El­i­gi­ble shares listed in Chi­nese stock mar­ket are ex­pected to de­but on in­dex provider S&P Dow Jones In­dices in Septem­ber 2019, a move set to at­tract bil­lions of dol­lars in in­flows to the do­mes­tic stock mar­ket after the cen­tral gov­ern­ment pledged to open it wider to for­eign in­vestors.

After three years of re­ject­ing A shares, the in­dex provider fi­nally de­cided to change its stance as China has made con­crete steps in pro­mot­ing open­ing-up and has played a more sig­nif­i­cant role in global in­vest­ment port­fo­lios in re­cent years.

El­i­gi­ble China A shares that are ac­ces­si­ble via the Shang­hai-Hong Kong Stock North­bound Con­nect or Shen­zhen-Hong Kong Stock North­bound Con­nect fa­cil­i­ties — two cross-bor­der in­vest­ment chan­nels that al­low global in­vestors to trade in A-shares — will be added to the in­dices prior to the mar­ket open­ing on Sept 23, 2019, and a full list of pre­lim­i­nary el­i­gi­ble shares with pro­jected weights is ex­pected to be pub­lished by the end of this year, said S&P Dow Jones.

The lat­est in­clu­sion of Chi­nese A shares fol­lows a num­ber of nods from sev­eral key global in­dex providers such as MSCI and FTSE Rus­sell.

While the lat­est an­nounce­ment is only a sym­bolic one, bil­lions of dol­lars are ex­pected to flow into the do­mes­tic mar­ket in 2019, rep­re­sent­ing sig­nif­i­cant progress in China’s open­ing-up, and play­ing a pos­i­tive role in sta­bi­liz­ing the mar­ket, ac­cord­ing to an­a­lysts.

While some ex­ter­nal fac­tors could dis­turb mar­ket sen­ti­ment and pres­sure could go up in early 2019 amid un­cer­tain­ties over trade fric­tions, “mar­ket de­mand for yuan-dom­i­nated as­sets is ex­pected to in­crease in the long run”, said Xie Yax­uan, chief an­a­lyst with China Mer­chants Se­cu­ri­ties.

Re­cent data show for­eign in­vestors have been up­beat about A shares fol­low­ing a num­ber of pol­icy sig­nals in Novem­ber ex­pected to buoy mar­ket sen­ti­ment, for in­stance, more pol­icy sup­port to help ease the fi­nan­cial pres­sure on pri­vate en­ter­prises.

By the end of Novem­ber, the mar­ket value of shares traded via the Shang­hai-Hong Kong Stock Con­nect and the Shen­zhen-Hong Kong Stock Con­nect pro­grams reached 678.7 bil­lion yuan ($98.3 bil­lion), up 57.9 bil­lion yuan com­pared with the pre­vi­ous month, ac­cord­ing to China Mer­chants Se­cu­ri­ties.

For­eign cap­i­tal ac­counts for around 7 per­cent of the to­tal mar­ket value of A shares, and the net in­flow of for­eign cap­i­tal is ex­pected to reach around 355 bil­lion to 400 bil­lion yuan in the next year, with more for­eign in­vestors par­tic­i­pat­ing in the mar­ket, ac­cord­ing to Xun Yu­gen, chief an­a­lyst with Haitong Se­cu­ri­ties.

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