Market Consultation

Implementation of the Expansion ofEligible Stocks under NorthboundStock Connect within the FTSE
Global Equity Index Series

ftserussell.com

April 2023

Background
FTSE Russell completed phase 1 of the inclusion of China A shares in the FTSE Global Equity
Index Series (FTSE GEIS) in June 2020. Eligible China A shares are included in the FTSE GEIS
across Large, Mid and Small Cap segments at a 25% inclusion factor via the Northbound Stock
Connect Scheme. China A constituents represent approximately 7.07% of the FTSE Emerging All
Index as of 31 March 2023.
Expansion of Eligible Stocks under Northbound Stock Connect
On 19 January 2023, the Stock Exchange of Hong Kong Limited (HKEX) issued a circular on theupdated eligibility criteria in relation to the expansion of eligible stocks within the Stock Connect
programme.
The expansion of eligible stocks became effective from 13 March 2023, resulting in the addition of598 stocks listed on Shanghai Stock Exchange (SSE) and 436 stocks listed on Shenzhen Stock
Exchange (SZSE) on the eligible Northbound Stock Connect buy and sell list 1.

Consultation Purpose
In light of the significant increase in number of newly eligible stocks under the Northbound StockConnect, FTSE Russell is seeking feedback from the market participants on:i)

Whether the newly added stocks resulting from the expanded Stock Connect universethat meet the FTSE GEIS eligibility criteria for index inclusion should be implemented
in a single tranche or multiple tranches.

ii)

When the implementation should commence.

iii)

The minimum period of notice required in advance of the implementation.

Source: https://www.hkex.com.hk/-/media/HKEX-Market/Services/Circulars-and-Notices/Participant-andMembers-Circulars/SEHK/2023/CT01023E.pdf
1FTSE Russell

2Responding to the consultation
The proposals set out in this consultation document are included in order to seek market feedback
and may or may not result in changes to FTSE Russell indices or data solutions.
Index users and other stakeholders are invited to respond by 15 May 2023. The responses will bereviewed by the FTSE Russell Index Governance Board and an update on FTSE Russell’s proposed
approach will be communicated in due course.
Consultation responses should be submitted at https://www.surveymonkey.co.uk/r/HH8DR5W
All responses will be treated as confidential. FTSE Russell may publish a summary of theconsultation results, but no individual responses will be published and no respondents will be named.
If you have any questions about this survey, or if you encounter any technical issues, please contact
committeesecretary@ftserussell.com.

FTSE Russell

3Supporting Data and Impact Analysis
If all eligible stocks from the Stock Connect expansion were to be included in the FTSE Global All
Cap Index, the indicative projected impact would be as follows:•An additional 540 China A securities would be included in the FTSE GEIS.

FTSE Russell data as of 31 March 2023

The impact analysis was conducted by selecting the existing constituents of the FTSE China A
All Cap Index, within the FTSE Global China A Inclusion Index (via all access routes), fromexpanded list of eligible stocks within the Northbound Stock Connect to determine the projected
impact to the FTSE China A Stock Connect CNH All Cap Index within FTSE Global All CapIndex. The respective inclusion and exclusion levels for March 2023 can be accessed throughthe link here.
The 540 new additions represent 0.912% weight increase for China A and 0.642% weightincrease for total China2 within the FTSE Emerging All Cap Index.
% Mkt Cap
(Current)
34.547%% Mkt Cap(Expansion)
35.189%China A

7.071%

7.983%

0.912%

China Non A

27.476%27.206%-0.270%

Taiwan18.139%17.961%-0.178%India

16.145%15.987%-0.158%Brazil

5.632%

5.577%-0.055%

Saudi Arabia

4.268%

4.226%-0.042%South Africa

3.732%

3.696%-0.037%

Mexico3.045%

3.015%-0.030%MarketTotal China

FTSE Russell% Change
0.642%

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Thailand

2.938%

2.909%-0.029%Indonesia

2.317%

2.294%-0.023%

Malaysia

1.910%

1.891%-0.019%UAE

1.535%

1.520%-0.015%

Turkey1.045%

1.035%-0.010%Qatar

0.978%

0.969%-0.010%

Kuwait0.978%

0.968%-0.010%Philippines

0.833%

0.825%-0.008%Chile

0.678%

0.671%-0.007%

Greece0.439%

0.435%-0.004%

Hungary
Czech
Republic
Colombia

0.182%

0.180%-0.002%0.176%

0.174%-0.002%0.145%

0.144%-0.001%

Iceland0.121%

0.120%-0.001%

Egypt

0.097%

0.096%-0.001%

Romania

0.076%

0.076%-0.001%

Pakistan

0.044%

0.044%

0.000%FTSE Russell data as of 31 March 2023

The expansion is likely to result in a greater exposure to China A Small Cap constituents with theFTSE Emerging All Cap Index.

China A

Numberof cons(Current)

Number ofcons(Expanded)

Change1283

1823

540% wgt in
FTSE EM
AC(Current)
7.07%% wgt in
FTSE EMAC(Expanded)
7.98%

Change0.91%

Size segment breakdown relevant to the % wgt in the FTSE Emerging All Cap Index:

FTSE Russell data as of 31 March 2023

2 Total China refers to all China Share classes, namely A, B, H, Red Chip, P Chip, S Chip, and N Shares.

FTSE Russell

5To implement the 540 new additions to FTSE GEIS on a one-off basis, the projected index
turnover in the FTSE Emerging All Cap Index is expected to be 1.96%.

FTSE China A
All Cap

Number of
New Adds

Inv. Mkt Cap(CNY mn)

Index
Turnover540

468,979.24

1.96%

Average

Maximum(Days to Trade) (Days to Trade)
0.50

2.88

FTSE Russell data as of 31 March 2023

Additionally, based on the three months average daily trade value in US$, and assuming a fundsize of US$100bn with trading limited to a maximum participation rate of 20% of the daily turnover,the expected average number of days required to trade the new additions is half a day and themaximum number of days required to trade is less than three days.
Please see the list of names of indicative additions and their respective Days to Trade analysis athttps://www.ftserussell.com/governance/market-consultations.

FTSE Russell

6Consultation Questions1.

Based on the analysis, what is your preferred implementation approach for the inclusion of thenew China A additions resulting from the expanded Stock Connect universe?

☐ Single tranche☐ Multiple tranches (please note the preferred number of tranches in the comment box)
☐ Other – please use the comment box below to provide your answer.

Please enter your comments here:

2. When should the implementation of the new China A additions commence?

☐ September 20203 semi-annual review☐ March 2024 semi-annual review☐ Other – please use the comment box below to provide your answer.

Please enter your comments here:

FTSE Russell

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3. What is the minimum period of notice required in advance of the implementation?

☐ One month☐ Three months☐ Other – please use the comment box below to provide your answer.

Please enter your comments here:

4. Are there any other factors FTSE Russell should consider, or feedback that you would like toprovide, regarding the implementation of the China A Stock Connect Expansion?
Please enter your comments here:

FTSE Russell

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