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FTSE Russell to increase Chinese stocks’ weightage on equity indexes, recalibration aligns MSCI and S&P’s latest moves
2020/03/06 10:35:53

Mar 06, 2020 (China Knowledge) - 4 Mar, FTSE Russell, the world's second-largest index company, announced the quarterly audit change of FTSE China A50 Index, FTSE China A150 index, FTSE China A200 index, FTSE China A400 index and FTSE China A small-cap index. The change will take effect after the closing of the trading day on Mar 20, 2020.

It is expected that FTSE Russell's review of FTSE China A50 and other indexes will attract more foreign investors into A-shares, and is likely to accelerate the allocation of foreign monies to A-shares; and, hence improve the liquidity of the shares. According to the official calculation of FTSE Russell, the expansion could bring in USD 4 bln of passive capital inflow to A-shares.

After the readjustment, FTSE China A50 Index will include CSCI (601066), BOE (000725), ZTE (000063) and Will (603501); but, will also delete China Merchants Shekou (001979), Shanghai Airport (600009), NCI (601336) and Shang Port Group (600018) from the index.

From the perspective of the deletion and inclusion of the FTSE China A50 Index, financial stocks such as CSCI (601066) and technology stocks ZTE (000063) and Will (603501) will benefit from the inflow of foreign capital.

Given the importance of China’s equity market and its growing appeal to global investors, it is estimated that the international index giants will accelerate the inclusion of A-share weightage. In less than a year FTSE Russell has increased A-shares’ weightage twice, in Jun and Sep 2019, from 5% to 15%, respectively.

Last month on Feb 21, FTSE Russell announced that it would increase the inclusion factor of China's A-shares from 15% to 25%, and adding 88 new China's counters to the FTSE global stock index series. Adding to the compilation, other major index companies MSCI, S&P Dow Jones and other international indexes are also expanding the inclusion of China’s A-shares.

Considering the increasing openness of China's capital market will gradually attract a reasonably level of foreign capital participation to hit 10% mark from current under 3% -and, that translates into USD 900 bln.

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