Scientific Beta

Benefits and Pensions Monitor: "Scientific Beta will not be adding China A-shares to its smart beta indices. While Chinese authorities have made efforts to further promote the functioning of its stock market and enhance the overall market liquidity, there are some accessibility issues which Scientific Beta considers to be potential liquidity risks, or at least penalizing for its clients. For example, Chinese authorities could lock up foreign investor money in the case of extreme moves."

Benefits and Pensions Monitor 05/04/2019

"(...) Scientific Beta will not be adding China A-shares to its smart beta indices. While Chinese authorities have made efforts to further promote the functioning of its stock market and enhance the overall market liquidity, there are some accessibility issues which Scientific Beta considers to be potential liquidity risks, or at least penalizing for its clients. For example, Chinese authorities could lock up foreign investor money in the case of extreme moves. Even with the recent liberalization of QFII (qualified foreign institutional investor) program, the Chinese State Administration of Foreign Exchange (SAFE) retains its power to exercise macro-prudential supervision over the repatriation of capital and may impose temporary restrictions. As well, there is limited domestic availability of derivative instruments, in particular index futures, access to which is restricted to approved foreign institutional investors and remains limited in scope. This reduces investor ability to implement hedging strategies and risk management strategies. Plus, foreign-ownership restrictions on China A-shares, set at 30 per cent, could become critical with future inflows. (...)"