FTSE global indexes expected to include China stocks in a boost for Beijing

Unsplash/Hanny
Naibaho

• The global index provider FTSE 100 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 stabilize it in the midst of its trade war
  with Washington.
• FTSE inclusion would initially trigger $15 billion of foreign
  inflows into the market, a Chinese index publisher 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 $15 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.

The could help settle troubled Chinese markets as Beijing steps
up efforts to counter the destabilizing impact of Washington’s
trade war.