Executive: Investors turning to A-share LSE index
FTSE Russell, the London Stock Exchange's index provider, says its index including A shares is gaining traction with investors.
The index is the company's attempt to ride the momentum from the opening up of the Chinese stock and bond markets as well as internationalization of the renminbi, China's currency.
It comes after capital market liberalization measures have increased international investors' interest in Chinese assets.
Sudir Raju, managing director of exchange trade products for FTSE Russell, said on Sept 19 that Western institutional investors and sovereign wealth funds are increasingly buying its index, including A shares.
Launched last year, this index has a 5.9 percent weighting in A shares. It differs from the company's main emerging markets index, which includes weightings for only minor types of Chinese shares. A shares are far more popular and common in China.
Overall interest in the Chinese stock market has grown due to the inclusion of the RMB in the International Monetary Fund's basket of reserve currencies, which takes effect on Oct 1.
This has prompted global investors to increase holdings of yuan-denominated products, such as stocks and bonds, analysts say.
The FTSE index tracks underlying Chinese stocks, meaning it provides Western investors with opportunities to buy into the nation's equity market. Currently, they have limited access due to capital flow controls.
Raju says it is "not a question of if, but a question of when" for Chinese regulators to remove barriers for international investors.
His team has created another index with a 26.9 percent weighting for A shares to show the true significance and market demand for such shares in a global emerging markets portfolio. This index is not yet available for purchase.
FTSE Russell's efforts to channel funds into the Chinese stock market come as banks and securities companies such as Citibank are promoting the same opportunities to their clients.
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