FTSE Russell launches float adjusted China A-shares indexes

May 19th, 2017 | By | Category: Equities

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FTSE Russell has launched the FTSE China A Free Indexes, offering a free float adjusted version of the FTSE China A Indexes, a common benchmark used by international investors when referencing the performance of China’s A-shares market.

FTSE Russell launches float adjusted China A-shares indexes

A-shares are securities of Chinese incorporated companies that trade on either the Shanghai (pictured) or Shenzhen stock exchanges.

A-shares are securities of Chinese incorporated companies that trade on either the Shanghai or Shenzhen stock exchanges. They are quoted in Chinese yuan and can only be traded by residents of the People’s Republic of China or under the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) schemes.

Free float adjusted indexes adjust their constituent weightings according to how readily available the firms’ shares are in the marketplace, reducing the weight of companies where a significant portion of shares are closely held and not available for trading. It is a common adjustment used by most major indexes worldwide to better reflect the performance of the market that is considered investable to the average investor.

Jessie Pak, managing director, Asia, FTSE Russell, said: “FTSE Russell has a strong track record of delivering accurate benchmarks that capture a true representation of the market and we are delighted to extend our offering by launching the FTSE China A Free Indexes. Responding to specific demand from mainland Chinese investors, the launch of these free float adjusted indexes builds on FTSE China A Indexes that have proven so popular with international investors.”

In line with its focus for domestic investors, The FTSE China A Free Indexes will also not apply foreign ownership limits. The new indexes may therefore be more suitable to underlie future investment products, such as ETFs, for local Chinese investors.

As of 27 April 2017, the FTSE China A All Cap Free Index had 1912 constituents, representing $2.3 trillion of investable market capitalisation.

Due to the restrictions placed upon A-shares, they are not currently included in FTSE’s standard global benchmarks. Gradual and positive market developments with respect to a number of areas of FTSE’s Quality of Markets Matrix has moved the share class closer to being incorporated into several key global indexes.

In 2014, FTSE Russell launched its FTSE Global China A Inclusion Indexes as a transitional tool for international investors in preparation for the eventual inclusion of China A Shares in its widely global benchmarks. China A Shares remain on the FTSE Watch List for possible inclusion as a secondary emerging market.

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