China's stability a stark contrast to global uncertainties, CSRC Vice Chairman says

minutes 2018/06/15 05:21:20
China, CSRC, MSCI, stock connect

Jun 15, 2018 (China Knowledge) - China's stability is in stark contrast to the changes and uncertainties in the world, Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC) said, adding that this is the right moment for Shanghai to speed up its efforts to build an international financial hub. The country will continue to proliferate the opening of the capital market to the world, strengthen the cooperation and exchange with the capital markets of all countries, and ride on the trend of economic globalization.

Fang added the securities regulator will push for MSCI's China A-shares inclusion factor to be increased from the initial 5% to 15%, according to Fang Xinghai, vice chairman of the CSRC.

Global index provider MSCI officially adds 226 China's large cap domestic stocks to its major emerging market indices at the start of this month, a move expected to attract billions of dollars into China's stock market.

The June 1 inclusion with its 2.5% partial inclusion factor is part of a two-step process, with the second phase of inclusion being on September 3rd. China's A-shares will initially represent about 0.39% of the weighting on the MSCI Emerging Markets Index. The addition of the next 2.5% to the index will raise China's weighting in overall index to 31.31%.

Fang said the incorporation of China A-shares in MSCI indices on the 1st June have seen the daily average net inflow of Shanghai-Hong Kong stock connect and Shenzhen-Hong Kong stock connect rose to RMB 3.61 billion as of 11th June, up 167 % from the daily average inflow in the first five months of this year.

Meanwhile, Fang also gave details about the launch of London-Shanghai Stock Connect, which will enable Mainland companies to sell depositary receipts in United Kingdom and allow London traded firms to issue identical securities in Shanghai.

"London-Shanghai Stock Connect institutional arrangements are already in place, and preparations at the operational level are in full swing. The stock connect is expected to be officially launched during the year," he said.

Fang lauded China's futures market opening up to the world. The introduction of crude oil and iron ore futures have successfully attracted overseas traders into China markets, and their trading volume and positions have steadily increased. Significant results are achieved, for example, Shanghai crude oil futures listed for less than three months, but the trading volume and open interest have exceeded Dubai crude oil futures, steadily entering into the world's top three ranks, he said.

Moving forward, China will promote the introduction of more commodity and financial futures to better serve international commodity trade and provide risk management for entities and financial companies.

Fang also pointed out to the trend of international investors' allocating more of their investments to Renminbi assets, which partly explains why the exchange rate of many emerging market countries has fallen sharply recently, while the exchange rate of the Renminbi remains firm.

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