FTSE Group, a leading global index provider, and Shenzhen Securities Information, a subsidiary of the Shenzhen Stock Exchange, have signed a memorandum of understanding to facilitate the development of new indices for the China capital markets.
FTSE Group has announced plans to develop a range of China A-Share indices in conjunction with Shenzhen Securities Information, a subsidiary of the Shenzhen Stock Exchange.
Under the agreement, Shenzhen Securities Information and FTSE will undertake index-related research and development projects and leverage one another’s strengths promoting indices to Chinese domestic and international investors.
FTSE was the first global index provider to enter the China market. Since 2001, FTSE has created a comprehensive suite of benchmark and tradable A-Share indices which are widely used by domestic and international investors. Increasingly, investors are looking to supplement existing benchmark approaches with innovative indices offering unique access to the China A-Share market.
With an established data license agreement in place, the agreement signed today builds on an existing relationship with the Shenzhen Stock Exchange and will allow for the creation of specialised A Share indices leveraging Shenzhen Securities Information’s local market knowledge and FTSE’s international indexing expertise, including proven innovations in alternatively weighted indices and ESG (Environmental, Social and Governance), to serve investor needs.
David Fu, Executive, Vice General Manager, Shenzhen Securities Information, said: “This memorandum of understanding with FTSE is part of our effort to further improve and promote our products in line with sophisticated investor needs. The development of indices based on international standards incorporating innovative methodologies, along with FTSE’s recognised reach to global investors will facilitate the growth of the China capital market, and provide more opportunities for the creation of new investment products.”
Mark Makepeace, Chief Executive, FTSE Group, said: “FTSE is honoured to enter into this memorandum of understanding with Shenzhen Securities Information. As a leading global index provider, FTSE works with financial institutions around the world to create indices that best reflect global investor needs. China is one of the fastest growing markets and, as the A-Share market matures to be freely traded internationally, it will play a vital role both in the global capital market and in investor portfolios. We are proud to be a pioneer at the forefront of A-Share market development.”
With the China Securities Regulatory Commission progressively relaxing restrictions on foreign investment, investors are gradually getting opportunities to access China A-shares, which in turn is accelerating demand for barometers of the market. Consequently, FTSE is not the only index provider exploring this space. Indeed, back in 2004, S&P teamed up with CITIC Securities to offer a range of A-Share indices, while more recently it launched the S&P GIVI China A-Share, the first index of its kind in the Chinese market to combine low volatility and an alternative weighting scheme that weights a stock by intrinsic value, rather than market-capitalisation. MSCI, meanwhile, offers the MSCI China A Index.
However, perhaps the most widely-tracked China A-share index is the CSI 300 compiled by the China Securities Index Company. This index tracks the performance of the 300 most representative – as measured by a combination of market capitalisation and liquidity – A-shares listed on the Shanghai and Shenzhen stock exchanges. Investors are able gain exposure to the CSI 300 via a number of swap-based, or synthetic, exchange-traded funds (ETFs), including the Credit Suisse ETF (IE) on CSI 300 (CCSI) listed on the London Stock Exchange (LSE), the DB X-tracker CSI 300 Index ETF (XCHA) also listed on the LSE, as well as the Deutsche Borse (Xetra) and Borsa Italiana, and the Market Vectors China ETF (PEK) listed on the NYSE.