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Boosted foreign capital access to support market
By Z-Ben Advisors |
November 21, 2012, Wednesday
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ONE topic that will be featured prominently among policy makers is the manner and speed at which financial markets will be developed. If the recent slew of reforms and programs from China's financial regulators are any indicator, officials are bent on diversifying and maturing domestic markets at a rapid pace.
It is becoming painfully clear that a larger investment scope and market maturation is necessary for China's financial system to make the next step.
Qualified Foreign Institutional Investors and its yuan equivalent, Renminbi Qualified Institutional Investors, are once again in the news, with a weekend announcement of an additional 200 billion yuan (US$32 billion) to be injected into the RQFII program.
The QFII program has also been the target of a structural revision, as China Securities Regulatory Commission has formally acknowledged that applications above US$1 billion will be considered on a case-by-case basis, with a bias towards the largest international institution al investors.
CSRC's recent roadshow for the QFII program served as a final indicator that something was in the works.
Once these new quotas go live, greater offshore access will support the development of onshore markets, inject liquidity, and help facilitate a gradual re-balancing of global investment portfolios to better reflect underlying realities.
Remain optimistic
Some analysts have suggested that liberalization within the QFII/RQFII regime is being done to support domestic markets, which have recently tested new lows. While that argument seems intuitive, in our view CSRC has become increasingly agnostic about micromanaging equity markets directly, instead preferring to build a framework that will survive for the longer term.
The view from the ground, particularly for investment managers, is actually quite positive: major underlying shifts are already occurring and, while these don't point to an immediate reversal in macroeconomic indicators, they do serve as reasons to remain optimistic.
What has been surprising is how these changes are now beginning to be recognized outside of the Chinese mainland. By the end of the third quarter of this year, brokerage Asset Under Management has closed on 1 trillion yuan, the trust industry saw rapid gains in recent periods, nearing 6.3 trillion yuan in AUM as of the third quarter this year.
Having long sung the praises of the onshore market, the fact that many international firms have recently voiced a much more positive view, in aggregate, has taken us somewhat by surprise.
Z-Ben Advisors is a Shanghai-based consulting company, covering the Chinese asset management industry. Shanghai Daily has condensed the article. The opinions expressed are their own.
It is becoming painfully clear that a larger investment scope and market maturation is necessary for China's financial system to make the next step.
Qualified Foreign Institutional Investors and its yuan equivalent, Renminbi Qualified Institutional Investors, are once again in the news, with a weekend announcement of an additional 200 billion yuan (US$32 billion) to be injected into the RQFII program.
The QFII program has also been the target of a structural revision, as China Securities Regulatory Commission has formally acknowledged that applications above US$1 billion will be considered on a case-by-case basis, with a bias towards the largest international institution al investors.
CSRC's recent roadshow for the QFII program served as a final indicator that something was in the works.
Once these new quotas go live, greater offshore access will support the development of onshore markets, inject liquidity, and help facilitate a gradual re-balancing of global investment portfolios to better reflect underlying realities.
Remain optimistic
Some analysts have suggested that liberalization within the QFII/RQFII regime is being done to support domestic markets, which have recently tested new lows. While that argument seems intuitive, in our view CSRC has become increasingly agnostic about micromanaging equity markets directly, instead preferring to build a framework that will survive for the longer term.
The view from the ground, particularly for investment managers, is actually quite positive: major underlying shifts are already occurring and, while these don't point to an immediate reversal in macroeconomic indicators, they do serve as reasons to remain optimistic.
What has been surprising is how these changes are now beginning to be recognized outside of the Chinese mainland. By the end of the third quarter of this year, brokerage Asset Under Management has closed on 1 trillion yuan, the trust industry saw rapid gains in recent periods, nearing 6.3 trillion yuan in AUM as of the third quarter this year.
Having long sung the praises of the onshore market, the fact that many international firms have recently voiced a much more positive view, in aggregate, has taken us somewhat by surprise.
Z-Ben Advisors is a Shanghai-based consulting company, covering the Chinese asset management industry. Shanghai Daily has condensed the article. The opinions expressed are their own.
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