As long as FTSE does not elevate A-shares stocks to emerging markets, those equities will be excluded from well-known, heavily traded ETFs that benchmark to FTSE indices, such as the iShares China Large-Cap ETF (NYSEArca: FXI) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO). FXI is the largest China ETF by assets while VWO is the largest emerging markets ETF.
FTSE is not the only index provider to pass on promoting A-shares. In June, FTSE rival MSCI (NYSE: MSCI), also highlighting issues with the quota schemes, decided against adding A-shares to its emerging markets benchmark. In July, S&P Dow Jones Indices decided not to include China A-Shares in any S&P Dow Jones Indices’ global benchmarks at, including the S&P Global BMI, S&P/IFCI Composite, Dow Jones Global Index, and Dow Jones Global Total Stock Market Index. [S&P Denies A-Shares EM Promotion]
In early June, FTSE introduced a series of indices that will allow market participants to include China A-shares in global indices at a time of their choosing.
“FTSE will continue to consult and engage with market participants and Chinese authorities to monitor developments and gauge progress.Until restrictions are lifted further and the A-shares market meets the required criteria, the FTSE Global R/QFII Index Series represents an interim indexing solution. The series is developed to provide market participants with benchmark options, such that they can choose their China A-shares index allocation based on differing quotas or views on the market,” said the index provider.