Mainland scheme sparks H shares
Saturday, November 9, 2002
biz.scmp.com
BEI HU and DAVID WILDER
H shares rallied yesterday on hopes Beijing will soon allow mainlanders to buy Hong Kong stocks after Thursday's release of ground-breaking rules to open China's US$500 billion A-share market to foreign investors.
However, the provisional qualified foreign institutional investors (QFII) rules unveiled on the eve of the Communist Party Congress and seen to have a heavy political undertone, backfired at home as investors pushed mainland indices lower.
Effective December 1, qualified foreign fund managers, insurers, brokerages and banks can buy yuan-denominated A shares, treasury, convertible and corporate bonds traded on the Shanghai and Shenzhen stock exchanges.
Inspired by the news, the H-share sub-index yesterday gained 1.68 per cent against the Hang Seng Index's 0.75 per cent dip on speculation of mainland money flooding into the sector through a qualified domestic institutional investors (QDII) scheme.
"The next step is QDII . . . people are buying ahead," South China Securities institutional sales head Raymond Tsui Yick-ki said.
QFII and QDII have often been mentioned in one breath as steps to liberalise China's capital account without full yuan convertibility. However, mainland officials, concerned the QDII scheme will speed up domestic capital outflow, have said its introduction will take longer.
The start of the 16th Communist Party Congress in Beijing yesterday also lifted China stocks.
"The backdrop is the belief that after the congress, the reforms will be speeded up," Phillip Securities research head Louis Wong Wai-kit said.
At home, some observers see the new QFII rules as a political gift to the party congress unlikely to attract a flood of foreign capital.
"Investors are growing weary of such market intervention," a Shenzhen analyst said. "People are also worried there will be no more market-boosting measures in the rest of the year."
The Shanghai and Shenzhen indices covering the 1,191 or so A-share stocks each shed more than 2 per cent yesterday.
Meanwhile, foreign institutions are discouraged by China's poor corporate governance and a lack of understanding of A-share companies, in addition to high valuations and the QFII scheme's excessive restrictions. |
