HSBC and Citi have both announced the completion of their first securities lending transactions in mainland China from offshore investors using the revamped Qualified Foreign Institutional Investors (QFII) scheme.
The scheme’s new rules, which came effective on November 1, give offshore investors expanded investment scope and permission to conduct more trading activity, including securities lending and bond repo, in a bid to attract more global investors.
China has also combined the QFII with the RMB Qualified Foreign Institutional Investors scheme in order to lower entry requirements and simplify procedures.
HSBC completed two securities lending transactions conducted by China Asset Management on the Shanghai Stock Exchange and Shenzhen Stock Exchange. Meanwhile, Citi announced the completion of a number of stock lending trades although it did not disclose the name of its counterpart.
Asset servicers have welcomed the new rules which they see as a key element in the opening up of China’s domestic market to international investors and asset managers. In particular, allowing securities lending transactions is viewed as a helpful development.
“Securities lending would help global investors realise flexible strategy deployment as they tap deeper into the China’s capital market,” said Brian Godins, head of securities services for Asia Pacific at HSBC. “This latest expanded investment scope and other relaxation measures will definitely help boost the attractiveness of QFII/RQFII and draw more foreign capital into China.”
It is also hoped that the move will attract a wider range of alternative and specialist fund managers to the domestic market in China.
“With this new QFII regulation, we expect that global brokers and hedge funds can finally play an active role in China’s A-share margin trading and securities financing, while private equity funds can enjoy a low-cost channel to invest in onshore companies with flexible repatriation, and asset owners and asset managers can lend out their securities for higher portfolio yield,” said Ji Yang, head of markets and securities services for China at Citi.
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