The Shanghai-Hong Kong bourse link will help boost liquidity in the China market, but the program will not immediately prompt index provider Stoxx Ltd. to consider including Chinese A-shares to global benchmark indices, an executive with the Zurich-based firm said.
“The Stock Connect can provide more liquidity to the market but we would not immediately include A-shares into our benchmark indices as it is not a key criteria in the consideration,” said Shirley Low, the Asia-Pacific head for Stoxx.
China needs to have a freely convertible currency before its shares can be included in major global benchmark indices, she told reporters in Hong Kong Tuesday.
Earlier this year, Stoxx announced that mainland-traded A-shares made it to only one index — China A index – because of poor investor feedback.
The announcement came after US-based rival MSCI Inc. said on June 10 that it decided to exclude A-shares from its Emerging Markets indices after a yearly review.
MSCI cited concerns among institutional investors on issues related to China’s foreign investor schemes.
FTSE Group, another major index compiler, has no Chinese A-shares in its Global Equity Index Series as of now, but it said it expects to include them within five years.
Low feels the Stock Connect will help Chinese investors diversify their portfolios.
As mainland investors get wealthier, it is important for them to diversify their holdings out of the A-share market, she said.
Among other things, investors can look into products traded on the German stock exchange.
As the Asia-Pacific region is a key focus for Stoxx, it will continue to seek partnerships in China, launch new indices in the region and open new offices.
An office will be opened in Australia, adding to the one in Hong Kong, for the Asia Pacific region early next year.
“It would be more efficient to have someone based in Australia rather than in the Southeast Asian countries, as Hong Kong can already cover the latter region,” she said.
Taking into account the time zone difference, her firm will be able to serve clients 18 hours a day after the launch of the Sydney office, Low said, adding that she is upbeat on Australia’s exchange traded product market.
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