Index provider FTSE Russell decided to keep China on its fixed-income watch list, preventing the country from entering a key global bond benchmark.
Following its country classification review, FTSE Russell said Sept. 26 that China will remain on its watch list for a potential upgrade to the highest accessibility level for foreign investors, as the Chinese bond market continues to make "significant progress" toward joining the FTSE World Government Bond Index.
However, investors wanted increased flexibility to execute and settle foreign exchange transactions and more improvements to China's secondary market liquidity, the index provider said.
Inclusion to the WGBI, which measures the performance of fixed-rate, local currency investment-grade sovereign bonds, was estimated to bring $6 billion to $7.5 billion in investment inflows to China per month, estimates from Goldman Sachs Group showed as reported by Bloomberg News.
Earlier this month, JPMorgan Chase & Co. said it will add Chinese government debt to its benchmark emerging-market indexes in a phased process commencing Feb. 28, 2020. In April, Bloomberg LP's Bloomberg Barclays began adding Chinese bonds to its global benchmark.
FTSE Russell also kept Malaysia on its watch list for a potential downgrade from the current market accessibility level of 2, which is the highest market accessibility level.
Meanwhile, it assigned Israel a market accessibility level of 2, allowing the country's local currency bonds to be added to the WGBI from April 1, 2020.
In addition, Argentina was removed from the watch list for a potential reclassification to secondary emerging market status due to the imposition of capital controls. Romania and Tanzania attained secondary emerging and frontier market status, respectively.
FTSE Russell's next interim review is due in March 2020.
