The central bank's new regulations require the implementation of experts to lift QFII / RQFII investment restrictions: increase the enthusiasm for foreign investment in A
China-Singapore Jingwei Client, May 7 (Wu Yihan and Wei Wei) On May 7, 2020, the People ’s Bank of China and the State Administration of Foreign Exchange issued the “Regulations on the Management of Domestic Securities and Futures Investment Funds for Foreign Institutional Investors” (People ’s Bank of China, State Foreign Exchange The Announcement [2020] No. 2 of the Authority (hereinafter referred to as the “Provisions”) clarifies and simplifies the management requirements for domestic securities and futures investment funds of foreign institutional investors, and further facilitates the participation of foreign investors in China's financial market.
In the opinion of the industry, in addition to the cancellation of the QFII / RQFII investment quota restrictions, the "Regulations" have also improved the registration and management of investment cross-border funds remittance and exchange of qualified investors, investment risk management and a series of The management system related to opening up to the outside world is conducive to increasing the enthusiasm of foreign investors in allocating Chinese capital markets and guiding more foreign capital to flow into Chinese capital markets.
New latitude and longitude photo in RMB data map
Implementation of cancellation of QFII / RQfII investment limit
In fact, as early as September 10, 2019, the SAFE has issued an announcement saying that with the approval of the State Council, the restrictions on the investment quota of qualified foreign institutional investors (QFII) and renminbi qualified foreign institutional investors (RQFII) will be cancelled at the same time. RQFII pilot country and region restrictions.
The qualified foreign investor system is one of the most important systems for the opening of China's financial market. Since the implementation of the QFII system in 2002 and the RQFII system in 2011, more than 400 institutional investors from 31 countries and regions around the world have invested in the Chinese financial market through this channel.
The State Administration of Foreign Exchange has previously stated that international mainstream indexes such as MSCI, FTSE Russell, S & P Dow Jones and Bloomberg Barclays have successively included China ’s stocks and bonds into their index system, and steadily increased the weight of inclusion, foreign investors The demand for investment in China's financial market has increased accordingly. The comprehensive removal of restrictions on the investment quota of qualified foreign investors is a major reform to deepen the reform and opening up of the financial market and serve the new pattern of comprehensive opening up. It is also a reform initiative launched to further meet the investment needs of foreign investors in China's financial market.
The "Regulations" issued by the Central Bank and the SAFE, in addition to further clearly implementing the cancellation of QFII / RQFII investment quota restrictions, also improved a series of integrated management of local and foreign currencies, investment income remittance procedures, and investment risk management requirements. Management system related to the opening up of financial markets.
Specifically, the main contents of the "Regulations" include: First, the implementation of the cancellation of the domestic securities investment quota management requirements for qualified foreign institutional investors and RMB qualified foreign institutional investors (hereinafter referred to as qualified investors), and cross-border capital remittance of qualified investors And the exchange is subject to registration management. The second is to implement integrated management of local and foreign currencies, allowing qualified investors to independently choose the currency and timing of remitted funds. The third is to greatly simplify the procedures for remittance of domestic securities investment income of qualified investors, cancel the requirements for materials such as the special investment income audit report and tax filing form issued by Chinese certified public accountants, and replace them with tax payment commitment letters. The fourth is to remove the limitation on the number of custodians, allow a single qualified investor to entrust multiple domestic custodians, and implement the main reporter system. Fifth, improve the foreign exchange risk and investment risk management requirements for qualified investors' domestic securities investment. Sixth, the People's Bank of China and the State Administration of Foreign Exchange have strengthened post-event supervision.
What is the main role of QFII / RQFII?
In the past, the main channels for foreign capital allocation in the A-share market were the land-port connection and QFII / RQFII.
From the point of view of difference, Lugangtong is based on the exchanges of the mainland and Hong Kong, and establishes market connections with each other to realize cross-market investment by investors. QFII / RQFII is based on institutional investors such as asset management companies and securities management institutions, and it invests by issuing financial products to investors to absorb funds.
According to the data released by the Central Bank on the “Internal RMB Financial Assets Held by Overseas Institutions and Individuals”, as of March 31, 2020, the total market value of A-share stocks held by foreign investors (namely Lugangtong + QFII) reached 1.89 trillion yuan. The share of stock market value in A shares is 3.18%.
From the perspective of the organization, Cinda Securities previously pointed out that foreign investors have a stronger incentive to allocate A shares through Lushantong. Cinda Securities estimates the market value of QFII holdings. QFII has shown a slight upward trend since 2016, but Compared with the stock market value of Lugangtong, its growth rate is obviously small. The agency therefore believes that the incentives for foreign investors to allocate A shares through land shares in the past are stronger, mainly because of their convenience.
Before the foreign exchange bureau cancelled the QFII / RQFII quota, the investment of QFII and RQFII has not yet reached its total quota. According to the latest QFII investment quota approval table disclosed by the Foreign Exchange Bureau, as of the end of August 2019, a total of 292 investment institutions received a total of 111.376 billion US dollars. In terms of RQFII, 260 investment institutions received a total of 694.102 billion yuan. The maximum amount previously limited has not been reached.
The former chief strategic analyst of a domestic securities company pointed out to the Sino-Singapore Jingwei client that compared with the land-port connection, foreign investment through QFII / RQFII has a broader scope, which allows international investors to invest in warrants, stock index futures and other products, so It is more in line with the investment needs of international investors such as hedging and diversification. Therefore, from a system perspective, QFII / RQFII has an advantage in the process of connecting with the international compared with the land-port connection. The cancellation of the quota limit can be regarded as a precautionary preparation. . "
How will it affect the A-share market?
Wind data shows that as of the end of 2019, there were 338 listed companies that disclosed QFII heavy holdings in the A-share market. From the perspective of industry distribution, QFII holds the largest share of shares in the banking sector. In addition, non-banking finance, household appliances, medical biology, food and beverage sectors are also favored by QFII funds.
CITIC Securities previously pointed out that foreign long-term heavy positions have five more obvious characteristics. First, the return on net assets and market value of most foreign long-term stocks are in the top 20% of the industry; second, foreign long-term stocks are stocks with stable performance; third, foreign long-term stocks have strong profitability Since 2017, the average ROE has reached 15%, which is significantly higher than other stocks in the market; Fourth, the valuation of foreign heavy-duty stocks is mostly lower than the industry average; Fifth, the effect of institutional grouping is obvious.
Qian Delong, chief economist of Qianhai Open Source Fund, told the Sino-Singapore Jingwei client that the central bank has implemented the cancellation of the QFII and RQFII domestic securities investment quota management requirements, and the implementation of registration management for cross-border capital remittance and exchange of qualified investors will help guide more More foreign capital flows into China's capital markets, including stock and bond markets.
"After the opening of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect, the channels for foreign capital inflows and outflows of A shares have been fully opened, and A shares have been included in the MSCI Emerging Market Index and other international index systems. For high-quality stocks, the annual inflow reaches about 300 billion yuan. In April, foreign capital returned to A shares of 53.3 billion yuan, and it is expected that the inflow of A shares will accelerate in the future. The policy announced by the Central Bank today is good for the stock market and the bond market, especially foreign investment. Bailong horse stocks and technology leading stocks benefit more. "Yang Delong said.
Wen Bin, chief researcher of China Minsheng Bank, told the Sino-Singapore Jingwei client that the introduction of the new policy is more convenient for foreign qualified institutional investors to invest in China's capital market, and is another measure to expand the opening of China's financial market. "Since last year, China ’s capital markets, including stock and bond markets, have been included in many major international indexes including Mingsheng and FTSE Russell. After including these indexes, international investors’ willingness and enthusiasm for the allocation and investment of China ’s capital market Both are increasing. The removal of the QFII and RQFII limits last year expanded the opening of the financial market. On the other hand, it can also satisfy qualified foreign institutional investors to participate in the investment of the Chinese capital market and increase the enthusiasm for allocating the Chinese capital market.
Wen Bin said that due to the impact of the epidemic, the global international financial market has fluctuated tremendously since this year, while China ’s capital market, including the stock market and the bond market, has generally maintained a relatively stable operating trend, and the characteristics of RMB assets as a safe-haven asset have also begun to appear. International investors are also optimistic about China ’s capital market. Since the beginning of this year, China ’s stock market and bond market have all shown a net inflow. At this time, these policies will bring convenience to foreign investors and will also help increase the RMB ’s The status and role of financial markets. (Sino-Singapore Jingwei APP)
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