FTSE Rus­sell A-share recog­ni­tion to bring new cap­i­tal in­flows

Global Times US Edition - - BIZUPDATE -

Lead­ing global multi-as­set in­dex FTSE Rus­sell has just an­nounced plans to raise the weight­ing of Chi­nese A shares in one of its bench­mark global in­dexes to 15 per­cent from 5 per­cent.

The move is likely to at­tract up to $5 bil­lion in in­cre­men­tal cap­i­tal from over­seas in­vestors into the A-share mar­kets -- not a sen­sa­tional amount but one that would boost con­fi­dence as China fur­ther in­ter­na­tion­al­izes its fi­nan­cial mar­kets, one do­mes­tic ex­pert said.

A to­tal of 87 A-share stocks will be newly in­cluded in the FTSE Global Eq­uity In­dex start­ing from Septem­ber 23, the in­dex provider an­nounced on Fri­day.

This is the sec­ond phase of FTSE Rus­sell’s three-stage step to in­cor­po­rate A-share stocks. The com­pany be­gan in­cor­po­rat­ing Chi­nese eq­ui­ties in June, and the ad­di­tions are be­ing made in three stages end­ing in March next year.

The FTSE Rus­sell’s in­clu­sion of A shares is another ex­am­ple of global in­dex providers’ recog­ni­tion of A shares, which, al­though giv­ing lim­ited stim­u­lus to the mar­kets, would “give a clearer sign of in­vest­ment di­rec­tion for in­ter­na­tional in­vestors,” Zhang Xia, chief strat­egy an­a­lyst at China Mer­chants Se­cu­ri­ties, told the Global Times on Sun­day.

Ac­cord­ing to Zhang, the FTSE’S planned Ashare change in weight­ing in Septem­ber will bring about $4 bil­lion of in­dex-repli­cat­ing pas­sive in­vest­ment cap­i­tal in­flows, as well as an ex­tra of $900 mil­lion in ac­tive in­vest­ment cap­i­tal.

“Al­though the amount of for­eign in­vest­ment brought by the weight­ing in­crease might be rel­a­tively small, it is sig­nif­i­cant in the in­ter­na­tion­al­iza­tion of the A-share mar­ket by boost­ing mar­ket con­fi­dence and en­cour­ag­ing more ac­tive in­vest­ment from for­eign in­sti­tu­tions,” Zhang said.

Another lead­ing global in­dex provider MSCI on Au­gust 8 an­nounced it would in­crease the in­clu­sion fac­tor of China A Large Cap shares from 10 per­cent to 15 per­cent, which Zhang fore­cast would bring about $3.6 bil­lion more in pas­sive in­vest­ment cap­i­tal into the A-share mar­kets.

Zhang noted that in the long run, the pro­por­tion of for­eign in­vest­ment in the A-share mar­kets will rise steadily.

“The cur­rent val­u­a­tion of the A-share mar­ket is dis­pro­por­tion­ately low,” Zhang said. “Com­pa­nies have strong po­ten­tial in the long run. These all stand out as the ap­peals of the A-share mar­ket for in­ter­na­tional in­vestors,” he said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.