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China opens up off-limits stocks
By Alex Frew McMillan
HONG KONG, China (CNN) -- China will let select overseas institutional investors buy shares in its domestic stock markets, officials say. They will be given access to China's 1,200 A share listings, which have previously been off limits to all but Chinese investors. China will allow certain banks, brokerages, fund managers and insurers to buy into the $500 billion A share market starting December 1, under a scheme known as the Qualified Foreign Institutional Investors (QFII) program. The announcement, which came Thursday, was timed to coincide with the start of the 16th Communist Party Conference, which started Friday morning. (Special report on China's new leaders) It had been expected for more than two years but was delayed repeatedly by fears that China's markets were not sufficiently well-regulated. Restrictions on size of stakeThe stock-watchdog China Securities Regulatory Commission and the central People's Bank of China made the declaration, which will let approved qualified investors make limited investments in both the stock and bond markets.
Overseas investors will not be allowed to buy more than 20 percent of a company's stock, and no one investor will be allowed to buy more than 10 percent of a company. There will also be restrictions on size that limit access to the biggest institutions. Banks, for instance, will have to rank in the top 100 in the world and have more than $10 billion in securities under management. The decision should nevertheless result in a new flow of funds into the markets, Asia's third-largest by market capitalization. Stocks down despite boostBut Chinese stocks are down despite the likely influx of new cash. The A share indexes are down 1.48 percent in Shanghai and 1.69 percent in Shenzhen in early afternoon trade on Friday. The B shares, which are already open to overseas investors, are also off, down 1.62 percent in Shanghai and 2.07 percent in Shenzhen, in line with a regional slide in Asian equities. Overseas investors so far have been limited to buying stock in the roughly 100 B share companies. Many of the largest Chinese companies have also sought international listings in Hong Kong and New York as a way to raise funds. China's stock markets tend to be driven by retail punters and often prove highly erratic. They were the best-performing stocks in Asia last year, with the B shares almost doubling in value.
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