The First Round Of The Three Major International Indexes, "Na A" Ended In The Neutral Period Without Hindering The Continuous Increase Of Foreign Capital.

Before the opening of June 22nd, FTSE Russell brought the A share into the factor from 17.5% to 25%, which involved 1051 stocks. This marks the completion of the A shares of FTSE Russell in the first three steps.

It is worth noting that this is also the three major international index (MSCI, F Jones and FTSE Russell) the first phase of the A share included in the closing sign. However, after the first stage, the three major international indexes did not continue to announce the next stage of the work. They all indicated that they were still considering further upgrading the A share factor. What's more, overseas investors believed that several problems restricting their further investment in China are still to be solved.

This also means that the process of internationalization of A shares will slow down in 2020, but slowing down the pace does not imply that the speed of foreign capital flowing into A shares is slowing down. In fact, the inflow of funds and the inflow of funds are not completely consistent. The inflow of funds is lagging behind the relative nodes. Therefore, from the trend of the whole year, 2020 is still a great year for foreign capital flowing into the A share market.

The three largest index is the first stage of A.

In the past two years, A shares have completed the first stage of internationalization. Since 2018, MSCI, FTSE Russell, S & P Dow Jones and other international indexes have begun to incorporate A shares, and the proportion of index has gradually increased.

From June 2018 to September, May 2019, August and November, MSCI increased the proportion of A share market shares to 5%, 10%, 15% and 20%. The tracking funds of the MSCI global index and the emerging market index are respectively 1 trillion and 600 billion US dollars and 3 trillion and 200 billion US dollars. According to the proportion of A shares in two indices, the agency expects that the four step expansion of MSCI will bring about 16 billion 200 million A, 18 billion 300 million US dollars, 15 billion 900 million US dollars and 27 billion 700 million US dollars respectively.

FTSE Russell increased the proportion of A shares in June 2019 and September to 5% and 15% respectively, and decided to increase it to 25% in March 2020. The tracking funds of FTSE Russell global market index and emerging market index were respectively 16507 billion US dollars and 49 billion 300 million US dollars. After three steps, the share of A shares in the FTSE Russell global market index was 0.11%, 0.33% and 0.56% respectively. 1.11%, 3.33% and 5.56%, the three step is expected to bring about 2 billion 400 million US dollars, 4 billion 800 million US dollars and 4 billion 800 million US dollars.

In addition, the S & P Dow Jones Emerging market index was included in the A share in September 2019. The BMI index of the S & P Dow Jones Emerging market was tracked at $189 billion 800 million, while A shares accounted for 6.2% of the index. It is expected to create an incremental potential of about 11 billion 800 million US dollars in the A index.

It can be seen that the three major international indices will bring more than 100 billion US dollars of foreign capital inflow to A shares. From 2018, the scale of foreign capital inflow through the North has begun to enlarge. The scale of foreign capital inflows has exceeded 600 billion yuan since 2018, and foreign capital is becoming another important pole in the A share market.

However, after the first phase of the international index "Na A" is closed, A shares will enter a stage of slowing down of the international rhythm. Up to now, the three major indices have not yet planned for further expansion.

There is also concern in the market: will the slowdown in the internationalization of A shares affect the scale and willingness of foreign capital inflows?

In this regard, Zhang Qiyao, a strategist at Guosheng securities, said: "the international index is not only an index significance, but also more like a global asset allocation certification. The pace of foreign capital admission will not stop because of the exponential expansion. From the experience of China, Taiwan, Korea and other markets, the MSCI expansion interval will still maintain a unilateral continuous inflow trend. We also made it clear before that "MSCI expansion is postponed, but it will not affect the continuous inflow of foreign capital". At present, we maintain the 200 billion -3000 billion annual increase in foreign investment.

Cao Gang, an investment partner of zhe Hao, also told reporters: "whether it is the Korean market or the Taiwan market, the inflow of foreign capital is not in the proportion of MSCI to increase the impulse flow of the current year, but during this period there is continuous inflow of funds every year. After the proportion is increased to 100%, foreign capital will continue to flow for 2-3 years. It can be determined that the A shares of foreign capital increase is a relatively definite trend in recent years, and the increment of foreign capital can still be expected.

When will the next phase open?

Although there will be no change in the trend of domestic and foreign capital inflow in the Nash A period, when the three major international indexes will be opened to the next stage, it is also a concern for the market.

MSCI has repeatedly suggested that the proportion of A shares in MSCI continues to increase, which mainly faces four constraints, namely, lack of hedging tools, short settlement period of stock funds, risk of vacation in interconnection, and gradual transition to comprehensive trading account mechanism.

The above four problems can be divided into two major aspects: first, the problem of hedging tools, and the richness of domestic market risk management tools is an important bargaining chip as well as an important reason for foreign investors' hesitation.

Corresponding to the overseas market, there are three stock index futures and Shanghai 50ETF options in the domestic A share derivatives, and the Shanghai and Shenzhen 300ETF options to be launched immediately. However, compared with the overseas market, the A stock derivatives currently offered by domestic exchanges are not rich enough to meet the needs of investors' risk management as a whole.

However, according to reporters, in recent two years, regulators have made great efforts in enriching derivatives products, and some products that have been waiting for many years have been approved in recent years. In addition, the HKEx is also striving to introduce programmes and products that meet the interests of many parties. This constraint is no longer a problem.

Zhang Xia, chief analyst of China Merchants Securities strategy research, summed up the last three issues as operational and management risks brought about by different market trading mechanisms or systems. He said: "to solve these problems requires relatively long-term market infrastructure, which is difficult to adjust in the short term. This is also a process for A shares to integrate with the international market. Any improvement in any of these areas will help to enhance the weight of A shares in the international market index. "

However, looking at other markets that can be referenced, it will still take some time for A share to achieve 100% in the major international indexes.

"We can take the experience of Korea as a benchmark to look into the future rhythm of China's A shares being included in the international indexes. The Korean stock market has been in the MSCI for 6 years since its beginning. However, compared to South Korea, China's economy is huge, and China's financial opening up is accelerating. Taking into account the important impact of A shares on the international index, the international index for China's A shares will be faster than Korea. " Everbright Securities analyst Zhou Zipeng believes.

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