New | Beijing expected to ease capital controls under QFII
Institutional investors may soon be allowed to move funds daily in line with other schemes
Hong Kong fund managers and brokers expect Beijing will further relax its capital controls and allow investors under the qualified foreign institutional investor scheme to take capital out every day instead of on a weekly basis.
Hong Kong Investment Funds Association chairman Bruno Lee Kam-wing said on Wednesday the fund industry had learned that the State Council was reviewing the change and expected it would happen soon.
"This is definitely good news for the Hong Kong and international fund industry because the current weekly repatriation is too restrictive," Lee said.
He said the rule was set in such a way because when Beijing launched QFII in 2002 it was the first scheme to allow foreign investors to invest in the mainland Chinese stock and bond markets.
"Back then, Beijing wanted the fund managers to invest for the long term and did not want them to take money in and out too soon," he said.
But the rule now looked outdated following the 2011 launch of the renminbi qualified foreign institutional investor scheme, which allowed daily fund flows, while the Shanghai-Hong Kong Stock Connect in November last year allowed investors to conduct cross-border trading each day.
"The change will make QFII in line with other cross-border schemes," Lee said.
Joseph Tong Tang, an executive director of Sun Hung Kai Financial, said Beijing's planned move was in line with international practice. "This reform will enhance the global standing of the yuan," he said. "Beijing has been keen on pushing the yuan as an international currency."
For the past six years, Beijing has been encouraging more international usage of the yuan in trade settlement and investment. Recently, it has gone a step further, pushing for the yuan to be included in the International Monetary Fund's basket of reserve currencies, alongside the US dollar, euro, yen and pound.
Brokers said the reform could also boost the chances of mainland Chinese stocks being represented in global benchmarks such as the MSCI Emerging Market Index.
The QFII scheme gives licences and quotas to big banks and insurers allowing them to invest a total of US$72.1 billion in mainland Chinese bonds and stocks.
Andrew Fung Hau-chung, an executive director of Hang Seng Bank, said the new move would give QFII investors more flexibility in their cash management and asset allocation decisions.
"This will enhance liquidity in the mainland share market and perhaps turnover in the yuan forex market," Fung said.
Investment Solutions director Charles Salvador said the real impact of the change would be that asset managers domiciled in non-RQFII centres, such as the US and Japan, would be able to invest in China's equity market.
