Foreign investors play FTSE with Chinese stocks, plough US$6.3 billion back into mainland stock market
- Global fund managers buy stocks worth 7.3 billion yuan through stock connects on Friday
- Inclusion in FTSE Emerging Index to be implemented in three steps
Foreign investors have ploughed 43.3 billion yuan (US$6.3 billion) into mainland China equities this month in anticipation of the inclusion of these stocks in the FTSE Emerging Index, which came into effect on Monday morning, in a turnaround from a massive sell-off in May.
Global fund managers rushed to buy Chinese shares on Friday, the day before their inclusion became official, snatching stocks worth 7.3 billion yuan through the stock connects in Hong Kong to reflect the change in weighting of the FTSE index. This led to the biggest amount of purchasing in about two weeks.
A thaw in the US-China trade war and the prospect of policy loosening by Beijing may have boosted the return of foreign funds, but the inclusion by UK-based index compiler FTSE Group, which trades as FTSE Russell, is a major driver.
More than 1,000 Chinese companies – from big caps to medium and small caps – have been added to the gauge for the first time, and will be tracked by global funds with assets worth US$140 billion, according to FTSE.
The inclusion of Chinese stocks by FTSE follows on the footsteps of an inclusion by global indices compiler MSCI, which added these equities last year and doubled their weightage last month.
“The inflows were similar to that of the May MSCI rebalance for a majority of the trading session, before inflows surged in the last 30 minutes to finish with US$1.1 billion on the day – 33 per cent higher than MSCI,” Chris Yung and Jason Lui, analysts at French bank BNP Paribas, said in a report on Monday.