AFTER three years of saying “no,” global index provider FTSE Russell is widely expected to welcome Shanghai and Shenzhen-listed shares into its major benchmarks this week, a move that could drive billions of foreign dollars into a market hit by a trade spat.

A decision by FTSE Russell to include A shares into its widely-followed global benchmarks — expected in today — would be another win for China’s market regulator, after the historic inclusion of mainland stocks in MSCI Inc.’s share indexes in June.

Eugenie Shen, managing director of the Asia Securities Industry & Financial Markets Association (ASIFMA), said FTSE Russell is “likely” to include A shares in its global emerging markets index, following MSCI’s move. The ASIFMA represents over 100 global financial institutions, including some of the world’s biggest asset managers that use FTSE indexes as benchmarks.

Duan Shihua, general manager of Chinese index publisher Shanghai Changer Investment Management Consulting, estimates a FTSE inclusion would initially trigger US$15 billion in foreign inflows into the market.

“If you don’t add China — the world’s biggest emerging market — into your emerging market index, your benchmark would be defective, at least incomplete,” he said.

A FTSE Russell spokesperson said its annual country classification announcement would be published after the U.S. market close Wednesday but declined to comment on whether China would be included.

A person familiar with the matter said if China is given the green light, the actual FTSE index inclusion could happen within a year.

According to FTSE, about US$16 trillion is currently benchmarked to its indexes.

The inclusion of Chinese shares would mean that passive funds tracking FTSE’s All-World and emerging markets indexes would be forced to buy yuan-denominated A shares.

Last month, FTSE Russel CEO Mark Makepeace said that FTSE could give a greater weighting to A shares than MSCI if a “yes” decision is made.

Chinese brokerage GF Securities said a higher weighting would mean FTSE could match its bigger rival MSCI in terms of pulling money into China.

MSCI gave A shares a roughly 0.8 percent weighting in its emerging market index initially, triggering an estimated US$18 billion in inflows. (SD-Agencies)