HONG KONG, June 21 (Reuters) - MSCI’s decision to include domestic Chinese shares in its global Emerging Markets Index will have no bearing on FTSE Russell’s own timeline for potential “A” share inclusion, the company’s chief executive told Reuters.
U.S. index provider MSCI said on Tuesday U.S. time it would add a selection of mainland Chinese “A” shares to the benchmark, tracked by around $1.6 trillion, in a long-awaited landmark development for global investment.
All eyes are now on FTSE Russell, which compiles the other key global emerging markets benchmark, to see if it follows in MSCI’s footsteps at its own classification review in September.
Mark Makepeace, CEO of FTSE Russell, which is owned by the London Stock Exchange Group, said the company had recently canvassed its client base on including China’s “A” shares, noting that many investors continued to have reservations on the China market.
“There is not a major push at the moment among our clients for inclusion,” Makepeace told Reuters in an interview on Tuesday.
“I am personally for inclusion, whether today or in two or three years’ time, but we should be trying to build a consensus - and the obligations of China with respect to opening up to international investors in the event of inclusion need to be clear. There is no point in us trying to do something if we don’t have the support of our clients.”
FTSE Russell launched in 2015 two transitional indexes that include China “A” shares, allowing clients keen to allocate funds to domestic Chinese stocks to do so at their own pace. Vanguard Group, one of the world’s largest passive investors, was the first manager to adopt the transitional benchmarks.
This year, FTSE Russell also launched an index tracking Chinese shares that can be traded through the Hong Kong-Shanghai and Shenzhen Stock Connect programme.
These indices give FTSE Russell greater flexibility on its timeline for including “A” shares in its global benchmarks, Makepeace said.
Reporting by Michelle Price; Editing by Eric Meijer