FTSE Russell announced its decision not to include Chinese debt in its government bond index, in a differentiated move compared to other major index players.
Domestic Chinese debt will remain on FTSE Russell's watch list with a potential upgrade on its accessibility rating. The Chinese government bond market continues to make «demonstrable progress towards meeting the criteria for the highest accessibility level», a FTSE statement said, with further updates coming «as appropriate after the interim review in March 2020».
The move differs from major index competitors like J.P. Morgan and Bloomberg which announced decisions for domestic Chinese debt inclusion this year in their emerging market index and global bond index, respectively.
Yuan Liberalization
China has indeed made steady efforts to open its Chinese debt markets including the launch of Bond Connect in Hong Kong, though global fund managers cite hurdles such as limited hedging options and low liquidity due to high concentration of ownership by Chinese banks.
Winning the FTSE inclusion could potentially provide sizeable inflows of $6-7.5 billion per month, according to a previous Goldman Sachs estimate.
Elsewhere in Asia, FTSE kept Malaysian debt and Vietnamese equities on its watch list with the latter potentially being rewarded reclassification from a frontier market to a secondary emerging market.
