FTSE Russell has launched two new indices tracking Chinese equities – the FTSE China A Innovative Enterprise Index series tracks fast-growing ChiNext stocks listed on the Shenzhen Stock Exchange, and the FTSE China A Stock Connect Index tracks mainland A-shares available to trade through the Shanghai-Hong Kong and the Shenzhen-Hong Kong Stock Connect Programmes.
The FTSE China A Innovative Enterprise Index tracks around 240 innovative, high-growth stocks listed on the ChiNext Board.
A-shares are stocks that are listed in Renminbi on the Shanghai and Shenzhen exchanges that were historically only available to be purchased by mainland China citizens due to government restrictions. Since 2003, select foreign institutions have been able to purchase A-shares through a program called the Qualified Foreign Institutional Investor (QFII) system. The Renminbi Qualified Foreign Institutional Investor (RQFII) system was initiated in 2011 and allows select financial institutions in Hong Kong to invest in the mainland securities market.
Jessie Pak, Managing Director, Asia, FTSE Russell, said: “We are delighted to further strengthen our China-linked benchmark products with the launch of these indices. China continues to make good progress in opening its domestic A-share market to international investors and the stock connect programmes have broadened the access to stocks for those investors without QFII and RQFII allocations.”
The ChiNext Board was created by the Shenzhen Stock Exchange in 2009 to attract listings from innovative and fast-growing Chinese firms, including high-tech companies, and now comprises 570 listings with a total market capitalisation of $752 billion, or 23% of the Shenzhen Stock Exchange. ChiNext stocks are accessible to QFII and RQFII allocation holders and are also available to foreign institutional investors through the recently launched Shenzhen-Hong Kong Stock Connect Programme.
“The inclusion of ChiNext stocks in our FTSE Global China A Inclusion indices reflects the rapid growth of the ChiNext market and further enhances the representativeness of our China benchmarks,” said Pak. “Our broad range of transparent benchmarking tools and tradable indices help meet the needs of our international customers to track their investment performance and create investment products, such as ETFs.”
The FTSE China A Innovative Enterprises Indices are free float-adjusted and liquidity screened. The FTSE China A Innovative Enterprises All Cap Index will initially have 240 constituents capturing $132 billion of investable market capitalisation, 24% of which will be technology companies. In the first quarter of 2017, FTSE Russell plans to incorporate ChiNext stocks into the FTSE Global China A Inclusion indices. Based on data as of 30 December 2016, ChiNext stocks will likely make up 9% of the FTSE China A All Cap Index investable market capitalisation.
In 2015, FTSE Russell launched its FTSE Global A Inclusion Indices as a transitional tool for investors in preparation for the eventual inclusion of China A-shares in its widely followed global benchmarks. China A-shares remain on FTSE Watch List for possible inclusion as a “Secondary Emerging market”.