(Retelling a story published Friday without any changes)
SHANGHAI, March 19 (Reuters) – FTSE Russell is in active talks with Chinese regulators about reform measures that could help lift the pressure of Chinese land shares in its global indices, a senior official told Reuters.
The index provider will list eligible companies listed on the Nasdaq-style STAR Market in Shanghai to the global equity criteria for the first time on Monday, after listing more than 1,000 stocks listed in China, or the introduction of A-sections, from June, 2019.
Only 25% of Chinese stock investment market cap is added to the FTSE global indices, meaning that Chinese companies are under-represented in the benchmarks.
Du Wanming, FTSE Russell director of Asia-Pacific Index Policy, said the index provider aims to gradually increase that to 100%, but that this would require complex reforms.
“We are actively seeking feedback from the market and also talking to the regulators” on such policy changes, said Du at FTSE Russell, which is owned by the London Stock Exchange Group.
China has taken bold steps to open its capital markets to foreign investors in recent years. But the latest push comes as Beijing becomes increasingly concerned about pollution from financial risks in global markets.
Du said short-term and medium-term goals include expanding China-Hong Kong Stock Link schemes – a popular channel for foreigners to invest in Chinese stocks – to bring including all A sections and aligning trading holidays. Eligibility for the scheme is essential for the inclusion of stock in FTSE global indices.
“The regulators and the exchange are actively working on the alignment of trading holidays,” Du said, adding that it would mean that trading north under Stock Connect would be open when Chinese markets operate but Hong Kong closed for holidays.
She said the index provider also hopes that China will relax its 30% cap on foreign ownership of China A shares, which would naturally increase China’s weight in the FTSE indices. .
Du was deeply concerned that Beijing will recover from capital market deregulation amid higher market volatility.
Chief banking regulator Guo Shuqing said in March that the government was “deeply concerned” about potential bubbles bursting in foreign markets and was exploring ways to regulate capital inflows.
“I think they are still desperate to open the market and will definitely (will) do it carefully,” Du said.
The inclusion of STAR companies into FTSE global indices also comes amid global tech tech sales but Du said market sentiment had little impact on inclusion decisions.
Among the stocks added to FTSE global indices on Monday, 10 STAR companies will be included in the FTSE Global Equity Index (GEIS) Series.
“The market (STAR) is huge. You can’t ignore it, ”said Du. “This is what investors want. They would like the index to be representative of the market. ”(Reporting by Samuel Shen and Andrew Galbraith; Editing by Ana Nicolaci da Costa)