News

Foreign investors target opportunities through China’s market opening

China_map_currencyCross-border investment flows into China will receive a boost from the removal of foreign investor quota restrictions under the Qualified Foreign Investor (QFI) programme and reforms to the CIBM Direct scheme for onshore bond investments. These are key findings of Funds Europe’s China Investor Survey 2020, conducted in partnership with Standard Chartered. With Chinese regulators advancing a wide array of policy proposals designed to enhance market access and to improve market efficiency, the survey asked respondents to prioritise which of these reforms will have the greatest impact on their business. Survey participants were asked to score each policy proposal as high, medium or low priority. These were then ranked in order on the basis of a weighted-arithmetic mean score, with a higher score indicating that a factor holds greater importance to respondents (fig 1).  From this agenda, respondents attached highest priority to the revocation of quota restrictions for the Qualified Foreign Investor scheme (which, from November 1, 2000, combined the erstwhile QFII and RQFII schemes) and to proposals to allow block trading on Stock Connect. Rank_of_policy_reformsInvestors continue to push for flexible mechanisms to support FX hedging, including proposals to allow third-party FX hedging in the QFI programme. Although securities lending and borrowing is allowed under Stock Connect this, to date, has been limited to brokers (‘exchange participants’). Respondents predict that the extension of this programme to institutional investors, asset managers and custodians (lending on behalf of asset owner clients) will boost lending activity and provide a stimulus to the market through enhanced liquidity and settlement fails coverage. Alongside this package of reforms, three Chinese regulators – the People’s Bank of China (PBoC), the China Securities Regulatory Commission and the State Administration of Foreign Exchange - jointly issued a consultation paper on 2 September 2020 relating to potential changes to China’s fixed income markets. This consultation paper outlines a mechanism through which qualified investors can trade cash bonds in both the exchange bond market and the interbank bond market, through the connected infrastructure for these two markets, without being required to apply for additional approvals. With the introduction of multi-tier custody arrangements, CIBM Direct investors can access the market via a local custodian or employ a global custodian to manage local settlement and asset servicing requirements via their Chinese sub-custodian (with client assets held in account in the global custodian’s name). CIBM Direct provides a direct route for foreign investors to access onshore bonds in the China Interbank Bond Market. Effective from 1 September 2020, the China Foreign Exchange Trade System (CFETS) also extended the opportunity for bond investors in CIBM Direct to trade across multiple counterparties via a request for quote (RFQ) mechanism­ based on quotes provided by market makers in the CFETS system. The CIBM Direct Trading Service is provided by CFETS in collaboration with Bloomberg and TradeWeb. CFETS is the interbank trading and foreign exchange division of PBoC, China’s central bank. Read the China Investor Survey 2020 report now » © 2021 funds global asia

Industry comments

Investing in tomorrow’s world

investmentAt times like these, HSBC Asset Management easily pivots towards emerging markets.

The spotlight on growth markets and the need to be nimble and dynamic is ever-sharper, given the difficulty in predicting monetary policy in the world’s major nations.

Sponsored feature: Navigating the complexities of FX execution and currency risk

A comprehensive, cost-effective, and transparent currency overlay hedging solution is crucial to mitigate FX exposure risks in the complex landscapes of Japan and China's FX markets, explains Hans Jacob Feder, PhD, global head of FX services at MUFG Investor Services.

Opinion

Transitioning to an era of scarcity

The world is transitioning from an era of commodity abundance to one of undersupply. Ben Ross and Tyler Rosenlicht of Cohen & Steers believe this shift may result in significant returns for commodities and resource producers over the next decade.

Asia credit: An outsized winner in the region’s energy transition?

Ross Dilkes, fixed income portfolio manager at Wellington Management, examines the opportunities and risks for bond investors presented by the region’s decarbonisation agenda.

A quiet revolution in Japan’s corporate governance

revolution, Japan, corporate governance, Shareholders, corporate, governance, standards, improvement, Tetsuro Takase, SuMi TrustShareholders in Japan no longer accept below-par corporate governance standards. Changes are taking place, but there are still areas for improvement, says Tetsuro Takase at SuMi Trust.

Why rising demand for healthcare is creating investment opportunities in China

rising demand, healthcare, investment, opportunities, China, Robert St Clair, Investment Strategy, Fullerton Fund ManagementRobert St Clair, head of investment strategy at Fullerton Fund Management, explores the reasons investors should be paying attention to the rising demand for healthcare in China.

Executive Interviews

Executive interview: PGIM CEO on where the ESG flowers should bloom

Sep 27, 2021

David Hunt, president and chief executive of PGIM, tells Romil Patel about leading a top 10 global asset manager in times where “empowering and encouraging the kind of investment decisions as...

Executive interview: Nicolas Moreau’s orderly transition

Jul 12, 2021

Nicolas Moreau, CEO of HSBC Asset Management, is moving to Asia as the firm looks to connect more directly with the region’s growth story. ESG is also a key focus – including the ‘just’ carbon...

Roundtables

India: An “obvious choice for global investors”

Jun 22, 2023

Funds Europe, the sister publication of Funds Global Asia, hosted an India investment discussion with two seasoned experts and asked if India is the ‘last one standing’ from the Brics phenomenon. We also hear that for India, the inclusion of Indian bonds in a major index may not be the desired...

Roundtable: Singapore comes of age as an Asian ESG hub

Dec 01, 2021

Strong ESG credentials strengthen the case for Singapore as a leader in Asia of the post-Covid recovery. Our panel discusses the risks and opportunities.