Foreign residents allow to invest in China’s USD 7 trillion stock market
 
China Knowledge Online
Aug 18, 2018
Category:

Aug 16, 2018 (China Knowledge) - Foreigners working in China can now invest in China’s A-shares was announced by the China Securities Regulatory Commission (CSRC) after the market closed yesterday. The breaking news is expected to open the floodgate of some 900,000 foreign residents who are working in the Mainland China to access the country’s USD 7 trillion stock market in Shanghai and Shenzhen.

For three decades since the Shanghai bourse launched in 1990 stock trading to foreigners were closed, and only granted to large funds from 2003 through the Qualified Foreign Institutional Investor (QFII) scheme, which to date, totaled over USD 100 billion from 287 foreign firms. Then came the Stock Connect and Bond Connect in 2016 where foreign institutions could trade domestic stocks and bonds through Hong Kong.

Candidly speaking, allowing approved foreign residents to invest directly would spice up their dining and drinking experience with new topics and sharing circling listed companies’ performance and investment opportunities. Before it was like watching the World Cup but no channel to execute ideas or opinions on the games. At only a quarter of U.S.’s GDP per capita Chinese economy will see ample room for growth for its listed companies, and these should lure more foreign participation.

Other positive news from the financial industry, mainly benefitting the foreign institutions, include the introduction RMB denominated crude oil and rubber futures, easing of trading quota, granting of more fund businesses’ license, allowing foreign M&A on local listed companies, and with many new laws amended this could further facilitate the access to China’s USD 49 trillion markets.

There are also other opportunities but little known to foreigners here include the access to the country’s trust products, mutual funds and other licensed bank’s wealth products. Just the size of high-yield collateralized loans in the trust industry exceeds the total of all the world’s hedge funds combined, at over USD 4 trillion. The high annual returns of these trust products of between 5% and 14% could by itself attract a plethora of salivating investors from across the globe. China’s USD 1.6 trillion mutual funds is another option made available through most local banks.

If U.S. is the standard gauge to apply the foreign ownership of American equities and bonds of one-third that proportion could translate into several trillions of dollars investments from overseas entering China. Recent months of strong buying from foreign institutional funds in the domestic stocks and bonds have seen billions of dollars a day of investments, and to quote from the China HK bond connect program’s official, daily buying of bonds will increase 4 folds by 2020 from current USD 1 billion a day.

The stock market access is a major move to open up China entirely, and it is foreseeable the Chinese currency will be completely free float and become a major global currency within a decade, or even faster.

 
 
Contact
Company China Knowledge Online
Contact Editor
Telephone +65 6235 8468
E-mail
Website www.chinaknowledge.com