China to allow foreign strategic investors to buy A-shares end-Jan - UPDATE
BEIJING (AFX) - China will allow foreign strategic investors from the end of this month to buy A-shares in companies that have completed their non-tradable share reforms.
BEIJING (AFX) - China will allow foreign strategic investors from the end of this month to buy A-shares in companies that have completed their non-tradable share reforms, the Ministry of Commerce said on its website.
The statement, signed off by five regulators, said foreign companies, or their parent companies, with more than 100 mln usd in actual assets or 500 mln usd in assets under management, will be allowed to trade in A-shares.
Currently, foreign investors can buy strategic stakes in listed Chinese firms by purchasing non-tradable state holdings, with only a limited number of overseas investors -- so-called Qualified Foreign Institutional Investors (QFIIs) -- allowed to invest in tradable A-shares.
The foreign strategic investors will not be allowed to transfer A-shares for three years after buying them, the ministry added.
The announcement follows reports in China's state-run media late last year pointing to the policy change.
Frederic Cho, manager of Chinese equities with Sweden's Hagstromer & Qviberg, said the decision is likely to attract interest from Fortune 500 companies seeking alternatives to well-established entry routes of setting up joint ventures or wholly-owned enterprises in China.
'I think it should be tempting for a lot of foreign investors to look at this,' he said.
Cho said the type of equity investments targeted under the new ruling represent a 'totally different ball game' from the comparatively short-term share trading under China's existing QFII scheme.
The volatile A-share market stands to benefit from the move, he said, after performing badly last year, because of its focus on medium- to long-term investments.
'It should be good because it should have, on the whole, a long-term balancing or stabilizing effect,' Cho said.
'That's exactly why the China Securities Regulatory Commission is one of the underwriters of this document -- because what they have been desperately looking for are long-term institutional investors or capital, which will not be the same ... as the opportunistic hot money that goes in and out.'
Paul Chan, senior research analyst with CSC Securities, said that foreign investors, particularly those pursuing capital gains, could take another look at investing in A-shares.
'It will increase the liquidity of the market,' he said.
Chan added, however, that the likely level of uptake is difficult to predict at this stage, noting that investors will have to factor in the impact of a flood of tradable shares onto the market once the lock-up period expires.
Neither the Subscriber nor AFX News warrants the completeness or accuracy of the Service or the suitability of the Service as a trading aid and neither accepts any liability for losses howsoever incurred. The content on this site, including news, quotes, data and other information, is provided by AFX News and its third party content providers for your personal information only, and neither AFX News nor its third party content providers shall be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon.
The statement, signed off by five regulators, said foreign companies, or their parent companies, with more than 100 mln usd in actual assets or 500 mln usd in assets under management, will be allowed to trade in A-shares.
Currently, foreign investors can buy strategic stakes in listed Chinese firms by purchasing non-tradable state holdings, with only a limited number of overseas investors -- so-called Qualified Foreign Institutional Investors (QFIIs) -- allowed to invest in tradable A-shares.
The foreign strategic investors will not be allowed to transfer A-shares for three years after buying them, the ministry added.
The announcement follows reports in China's state-run media late last year pointing to the policy change.
Frederic Cho, manager of Chinese equities with Sweden's Hagstromer & Qviberg, said the decision is likely to attract interest from Fortune 500 companies seeking alternatives to well-established entry routes of setting up joint ventures or wholly-owned enterprises in China.
'I think it should be tempting for a lot of foreign investors to look at this,' he said.
Cho said the type of equity investments targeted under the new ruling represent a 'totally different ball game' from the comparatively short-term share trading under China's existing QFII scheme.
The volatile A-share market stands to benefit from the move, he said, after performing badly last year, because of its focus on medium- to long-term investments.
'It should be good because it should have, on the whole, a long-term balancing or stabilizing effect,' Cho said.
'That's exactly why the China Securities Regulatory Commission is one of the underwriters of this document -- because what they have been desperately looking for are long-term institutional investors or capital, which will not be the same ... as the opportunistic hot money that goes in and out.'
Paul Chan, senior research analyst with CSC Securities, said that foreign investors, particularly those pursuing capital gains, could take another look at investing in A-shares.
'It will increase the liquidity of the market,' he said.
Chan added, however, that the likely level of uptake is difficult to predict at this stage, noting that investors will have to factor in the impact of a flood of tradable shares onto the market once the lock-up period expires.
Neither the Subscriber nor AFX News warrants the completeness or accuracy of the Service or the suitability of the Service as a trading aid and neither accepts any liability for losses howsoever incurred. The content on this site, including news, quotes, data and other information, is provided by AFX News and its third party content providers for your personal information only, and neither AFX News nor its third party content providers shall be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon.
