Stock Connect recovery paves way for more A-share inclusion in global indices
Global index providers expected to launch ‘mini’ indices to reflect China A-shares, amid easier access and a recovering stock market
Leading stock index providers continue to reject including A-shares in their main global benchmarks. But they are expected to increasingly launch mini indices to track the Chinese stocks to meet demand amid easier access and a recovering onshore stock market, according to Michael Orzano, director of global equity indices product management at S&P Dow Jones Indices.
China’s capital controls, most notably the 20 per cent monthly repatriation limit on the qualified foreign institutional investor (QFII) funds remains a concern to global stock investors because they pose liquidity risks in meeting redemptions, Orzano said.
QFII is the programme that permits certain licensed international investors to participate in China’s mainland stock exchanges.
They face similar risks given the fact that about 5 per cent of companies remain suspended in China’s stock market after official restrictions were put in place due to the summer market crash of 2015.
S&P’s Dow Jones, the MSCI and FTSE stock indexes have instead launched a series of mini or “alternative” China A-shares indices in recent years, as China gradually opens up the onshore markets to different types of investors and gradually unwinds stock market restrictions.