S&P Dow Jones to include A shares
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.