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Markets

FTSE Russell: China on watchlist for potential bond market accessibility upgrade

Pedestrians walk past an electronic ticker board displaying stock figures outside the Exchange Square complex, which houses the Hong Kong Stock Exchange.

FTSE Russell will consider upgrading its accessibility score for China's fixed-income market under the new country classification process the firm launched at the start of 2019 to make decisions on inclusion in FTSE Russell's benchmark bond indexes more transparent.

The index provider's first fixed-income country classification review, released Monday, said China is on the system's watchlist for a potential boost to the top score of "2" — needed for inclusion in FTSE Russell's flagship FTSE World Government Bond index — from "1" at present.

Under the new system, "2" represents the highest level of accessibility, while a score of "1" permits entry in the FTSE Emerging Markets Government Bond index but not the WGBI. A score of "0" represents the lowest level of accessibility.

FTSE Russell said Malaysia, which has been included in the WGBI since 2004, is on the watchlist for a potential downgrade to "1." A London-based spokeswoman for the firm couldn't immediately provide details on the background behind Malaysia's potential downgrade.

A FTSE Russell news release said the company "will continue to engage with local regulators and market participants" in Malaysia and China to assess the potential classification changes.

Those markets will be "reassessed against the WGBI eligibility criteria" at FTSE Russell's next review, scheduled for September, the news release said.

The Russell spokeswoman said a decision in September to elevate China's score to "2" would not automatically lead to the country's inclusion in WGBI. There would have to be a subsequent decision to include China.

Inclusion would follow that decision after a six-month transition period, she said.