Draft measures easing limits on overseas investors expected to increase liquidity of mainland equities
China's securities regulator has drafted new rules easing restrictions on foreign investors buying shares, in a move expected to increase the flow of overseas capital into the mainland markets.
Restrictions on repatriation of investments will be relaxed, as will stringent capital and market operation requirements that bar all but the very largest foreign institutional investors from the A-share market, according to high-level sources.
They said the new regulations, to be announced next month, were decided by the China Securities Regulatory Commission after consultations and lobbying from holders of qualified foreign institutional investor (QFII) quotas, such as HSBC and Morgan Stanley.
'These new regulations will expand who can be a QFII and will ease requirements on how long investors must have their money in the market before they can remit it out of the country,' a source said. 'This should increase trading volumes because people will be more willing to get in.'
Current regulations limit QFII eligibility to fund management firms that have been operating for five years and managing US$10 billion, banks that are among the world's top 100 and have securities assets of US$10 billion, and insurance companies with 30 years of operations and US$1 billion of paid-up capital.
The most onerous aspect of the QFII system was the lock-up requirement that forbade remittance of any quota funds for the first year and limited remittances to less than 20 per cent of capital per year after that, said HSBC's pan-Asia equity strategist Gary Evans. 'That's what people have the biggest objection to. Investors don't like the idea that they have to have everything tied up for that amount of time.'
