The addition of Chinese sovereign bonds to FTSE Russell’s flagship World Government Bond Index (WGBI) has received its final approval from the index provider.
The move is likely to bring billions of dollars in inflows into the Chinese economy.
However, the inclusion period will last 36 months, from November 2021 to November 2024 which is longer than was originally announced by FTSE Russell.
The index provider stated that the more conservative schedule is due to the response from market participants. In January, there was some pushback from large Japanese investors, some of the biggest users of the WGBI index, who were concerned about liquidity and capital controls.
However, the extended phased-in approach has been welcomed by HSBC Securities Services as it gives more time to investors to prepare for full inclusion.
“While the regulatory relaxations have encouraged greater foreign investor participation in the China interbank bond market, it takes time for market participants to get used to them,” said Patrick Wong, head of China business development and client management at HSBC Securities Services.
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