FTSE Russell, a leading global provider of indices to the exchange-traded funds industry, has unveiled the FTSE China A-H 50 Index. The new index has the same Mainland China-incorporated constituents at the company level as the FTSE China A50 A-share index but, where applicable, is able to switch into a constituent’s Hong Kong-listed share class (H-Shares) if they offer better value than their Shanghai or Shenzhen-listed A-share class.
Mark Makepeace, CEO of FTSE Russell.
The index, FTSE Russell’s first to combine both A-shares and H-shares, has been licensed to Deutsche Bank for the creation of an ETF to be listed on the London Stock Exchange and Deutsche Börse.
The index will select only one share class to represent each eligible company, either the A-share or the H-share, depending on which class is trading at a lower price. For companies with only an A-share listing, the A-share class will be used for inclusion. The selection process, which will take place on a quarterly review schedule (in March, June, September and December), will include an additional buffer screen to existing constituents to reduce index turnover. Once selected the relevant share classes are weighted by their respective A-share free float market capitalisation.
Mark Makepeace, CEO of FTSE Russell, commented: “FTSE Russell has a long track record of working in China, and is the most active benchmark provider supporting international investment in the region. As the Chinese domestic market opens, we continue to develop products that provide investors with a variety of tools to capture different aspects of the market. The FTSE China A-H 50 Index reflects our desire to create new index solutions for the region, as we look to support the diverse range of investment needs.”
H-shares are securities of Chinese incorporated companies and nominated by the Central Government for listing and trading on the Stock Exchange of Hong Kong. They are quoted and traded in Hong Kong dollars. Like other securities trading on the Stock Exchange of Hong Kong, there are no restrictions on who can trade H-shares.
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.
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 indices.
As of 29 February 2016, the index was weighted significantly towards the banking (40.6%), insurance (12.5%) and financial services (11.5%). The index is relatively concentrated with the top 10 constituents accounting for 50.4% of the total capitalisation value. The largest constituent is Ping An Insurance Company of China (8.9%).
The index is the latest addition to an extensive suite of China-themed benchmarks developed by FTSE Russell and is an innovative extension to its mega/large-cap China index offering, which also includes the FTSE China 50 Index, which tracks the performance of the largest 50 firms listed in Hong Kong (H-shares, Red Chips and P-Chips).
As of 30 March 2016, more than half of all non-China domiciled China-linked ETF assets are tracking FTSE Russell benchmarks.
The full range of China-themed FTSE indices include:
FTSE China A-H 50 Index
FTSE China 50
FTSE China A50
FTSE China A 200
FTSE China A 600
FTSE China A
FTSE Greater China 150
FTSE China International All Cap
FTSE China H Share
FTSE China B All-Share
FTSE China Red Chip All Cap Capped
FTSE China P Chip All Cap Capped
FTSE China S Chip All Cap
FTSE China N Share All Cap Capped