May 23, index compiling company FTSE Russell announced the results of the quarterly review of its flagship index in June 2020.
According to the previous announcement, FTSE Russell raised the China A-share inclusion factor from 17.5% to 25%, and made routine technical adjustments to the index constituent stocks. At this point, FTSE Russell's promotion of the inclusion factor of the first stage of A shares will be completed.
The announcement shows that the FTSE Global Stock Index Series (FTSE GEIS) newly included 2 A shares this time, namely Zheshang Bank and Yunong Commercial Bank. In addition, a number of H shares, B shares, P shares, red chips, and Chinese stocks have been included or excluded from the index. The above changes will take effect before the market closes on June 19.
2 new A shares added
This adjustment of FTSE GEIS newly included two A-shares, both large-cap stocks, no previously included A shares has been excluded.
Specifically, large-cap stocks added seven Chinese stocks, two of which are A shares, namely Zheshang Bank and Yunong Commercial Bank. The remaining five stocks are China Feihe (Hong Kong stocks, HKG:6186), One connect (Chinese stocks listed on NYSE:OCFT), Pharmaron (Hong Kong stocks, HKG:03759), Poly Property (Hong Kong stocks, HKG:0119) and Topsports (Hong Kong stocks, HKG:6110). No Chinese stocks were removed from large-cap stocks.
JS Global Life (Hong Kong stocks,HKG:1691), a Chinese stock, was added to the mid-cap stocks, no mid-cap Chinese stocks was removed.
Among the small-cap stocks, three Chinese stocks, Ascentage Pharma Group (Hong Kong stocks, HKG6855), Jiu Maojiu (Hong Kong stocks, HKG:9922) and Venus MedTech (Hong Kong stocks, HKG:2500), were added without excluding other Chinese stocks.
Micro-cap stock adjustments did not involve A shares, 26 Chinese companies including 360 Ludashi (Hong Kong shares, HKG:3601) were included, and 5 stocks including Cangnan Instrument (Hong Kong shares, HKG:1743) were eliminated.
21 billion RMB investment inflow
The A-share substitution factor changed from 17.5% to 25% from this quarterly review, which will bring in passive capital inflows of 4 billion USD. So a simple step-by-step 6-month implementation can bring about 21 billion yuan of passive incremental funds to A shares.
After the completion of this quarterly adjustment, FTSE Russell will complete the subdivision and the first stage of the A-share plan. Regarding whether to consider further expansion of A shares, FTSE Russell has no clear position at present.
FTSE Russell Asia Pacific Managing Director Bai Meilan said in an exclusive interview with the Shanghai Securities Journal that the A shares inclusion is a gradual, multi-step transformation, so as not to disrupts the global market. FTSE Russell will consult with the client before proceeding to the next expected implementation.
Bai said that before further improving the replacement factor of A shares, the Chinese market needs to focus on the following issues:
1, the holiday coordination arrangement of Shanghai and Shenzhen Stock Connect;
2, the issue of redemption of bonds under QFII and RQFII;
3, overseas Investors' participation in A shares has increased, and the limit for foreign capital holding A shares has broken through.
4, the transition to the use of a comprehensive trading account mechanism has been gradually implemented.
Source from China Security Journal