FTSE Russell has paved the way for the inclusion of domestic Chinese shares in global benchmarks with the launch of two new emerging market indices, marking a further step in the opening of China’s financial markets.
China’s two stock markets, in the middle of a vast bull market, are currently more than twice the size of the London market, giving an indication of how large a share of global benchmarks mainland stocks could become if Chinese markets were opened fully. The Shanghai market rose another 2 per cent yesterday, taking its gain this year to 50 per cent. Over the same period, the Shenzhen market has doubled.
The question of whether to add Shanghai and Shenzhen-listed stocks, known as A shares, to global indices has been a challenge for index providers. A-share inclusion could force investors to allocate billions of dollars into Chinese stocks, potentially drawing large sums away from other, smaller emerging markets.