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Despite their grumbling over strict capital controls and the overall quality of China's listed companies, overseas financial institutions show no signs of retreating from an unexpectedly early invitation from the Chinese Government to enter its fast-growing capital markets.
They are not wasting any time in examining the qualification requirements outlined in China's QFII (qualified foreign institutional investor) description which was unveiled last Thursday, which would allow foreign investors to trade A shares and bonds which were previously only limited to Chinese holders.
Among the earliest to respond to the long-awaited move, Standard Chartered said it would apply to be a clearing and trust bank under the QFII scheme. It is currently a clearing bank for China's B shares, which are available to foreigners.
"Standard Chartered wants to be an important clearing and trust bank for A shares," said the bank's board member Wang Dongsheng. "Foreign institutions and individuals prefer foreign banks in A-share clearing and trust, so foreign banks have a good chance."
Under the QFII scheme, the qualified institutional investor, which can be a bank, asset management company, insurer or securities firm, will have to set up a special renminbi account at domestic banks, act as custodians for the assets used for investment, and trade through domestic securities companies.
BOCI Securities Co Ltd, which is 49 per cent owned by the Bank of China's (BOC) Hong Kong-based investment banking arm BOC International Holdings Co Ltd, takes pride in having a headstart in the race to grab the first QFII licence.
"The BOC group is the most likely candidate to strike the first (A-share) deal," said Qian Wei, acting chief executive officer of BOCI Securities, on Friday.
"Each party in our group meets the basic requirements of the scheme - the three sides (BOC, BOCHK and BOCI Securities) will apply (to qualify) at the same time," Qian said.
Analysts say the new scheme, which opens up China's US$176 billion listed A shares, will greatly boost investor confidence on the hopes that it will bring fresh liquidity from overseas to cheer up the bearish domestic market.
But they said China's listed companies have to improve transparency and performance before greater enthusiasm among foreign investors is aroused.
(China Daily November 12, 2002)
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