For­eign­ers al­lowed big­ger stakes in Chi­nese com­pa­nies

Re­laxed reg­u­la­tion un­likely to cre­ate big short-term waves amid low stock mar­ket con­fi­dence: An­a­lysts

China Daily (Canada) - - BUSINESS - By XIE YU xieyu@chi­

For­eign in­vestors can own more of a listed Chi­nese com­pany af­ter rules were re­laxed to draw­long-term over­seas cap­i­tal.

Qual­i­fied For­eign In­sti­tu­tional In­vestors (QFII) and Ren­minbi Qual­i­fied For­eign In­sti­tu­tional In­vestors (RQFII) can hold up to 30 per­cent of a com­pany, un­der a guide­line is­sued by the Shang­hai Stock Ex­change on Wed­nes­day. Thathadear­lier­been­cappe­dat20per­cent of to­tal out­stand­ing shares in a com­pany. For­eign in­vestors will soon also be able to in­vest in more fi­nan­cial prod­ucts, in­clud­ing as­set-backed se­cu­ri­tiesand­pre­ferred shares, ac­cord­ing to the author­ity.

An­a­lysts said the move is meant to at­tract more long-term cap­i­tal and boost China’s eq­uity mar­ket. It is in line with the Chi­nese lead­er­ship’s plan to fur­ther open up the cap­i­tal mar­ket.

QFII and RQFII are pro­grams for li­censed for­eign in­vestors to buy and sell yuan-de­nom­i­nated “A” shares on the Shang­hai and Shen­zhen stock ex­changes.

State Ad­min­is­tra­tion of For­eign Ex­change data show that in Fe­bru­ary, China is­sued to­tal quo­tas of $52.3 bil­lion un­der the QFII pro­gram and 180.4 bil­lion yuan ($29.32 bil­lion) un­der the RQFII pro­gram, which al­lows in­vest­ments us­ing off­shore yuan.

QFIIs in­creased hold­ings in more than 20 Shang­hai-listed com­pa­nies, ac­cord­ing to their an­nual re­ports. The Bank of Ningbo Co Ltd and Ping An In­sur­ance (Group) Co of China Ltd were among com­pa­nies that got the most QFII in­vest­ment, Se­cu­ri­ties Times said on Thurs­day.

An­a­lysts said for­eign in­vestors, fa­vor­ing long-term value in­vest­ment, are cau­tious about China’s stock mar­ket, which has suf­fered bear­ish sen­ti­ment since 2008 and has been hurt by in­sider trad­ing and price ma­nip­u­la­tion scan­dals.

“The over­all amount of QFII and RQFII in­vest­ment is still limited on the A-share mar­ket, so the im­pact of the new rules may be limited in lift­ing the mar­ket,” said Zito Ji, an an­a­lyst with a mu­tual fund in Shang­hai.

In­vestors cite cor­po­rate gov­er­nance as a prob­lem. An­a­lysts say a lack of clar­ity about howBei­jing will tax prof­its from QFII in­vest­ments has also re­strained some in­vestors, Reuters said.

A weak­en­ing yuan and a pres­sured property in­dus­try is drag­ging in­vestor con­fi­dence in China’s stock mar­ket.

The bench­mark Shang­hai Com­pos­ite In­dex slumped by 1.4 per­cent to 1,993.48 on Thurs­day. And Shen­zhen Com­po­nent In­dex dived to a five-year low to 6,698.2.

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