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Market rout disrupts China's expansion in JPMorgan, FTSE Russell indexes

HONG KONG, March 26 (Reuters) – Global index providers J.P.Morgan and FTSE Russell are delaying the inclusion of Chinese bonds and stocks into their widely-tracked benchmarks owing to the slump in global markets caused by the coronavirus epidemic.

J.P.Morgan started a 10-month process of adding Chinese government bonds into its Government Bond Index Emerging Markets (GBI-EM) suite late in February, aimed at eventually giving China a 10% weight in its Global Diversified index, which is tracked by funds with investments of $202 billion.

But the U.S. bank will now keep China’s weight at 1% at the end of March, and reassess the schedule for inclusion later, a spokeswoman at the bank told Reuters on Thursday.

“While the adjustment to the inclusion schedule was made due to the market disruption in March, which impacted the global index community at large, China is on track for inclusion into J.P. Morgan’s flagship indices,” she said via email.

“Re-assessment will be made during April’s month-end rebalance period on the inclusion schedule going forward.”

The decision came after the coronavirus outbreak disrupted global economic activity, drying up U.S. dollar funding and pitching financial markets into their worst declines since 2008.

Index inclusions have helped boost capital inflows into China. Foreign ownership of Chinese bonds reached a record high in February.

FTSE Russell, another index publisher, incorporated only a quarter of Chinese A-shares into its indexes scheduled for March, pushing the rest of the inclusion to June.

“In light of current market conditions, our clients asked us to look for ways of reducing implementation risk,” FTSE Russell said in a press release on Monday. The company first announced its intention to split up the inclusion on March 16.

The China Securities Regulatory Commission said in a statement on Friday that it understands the adjustment was technical and would not affect the overall inclusion plans.

FTSE Russell announced on Monday is also delaying its review of the World Government Bond Index due for the end of March. China is on the watchlist for a potential upgrade into the index.

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