In a further sign of the growing openness in China's financial markets, private investors will be able to buy foreign securities for the first time under new scheme launched yesterday by China's State Administration of Foreign Exchange.
Investors will be able to open accounts at the Bank of China to trade securities on the HK stock exchange (pictured), where many foreign and domestic companies are listed.
The move is designed to help reduce the trade frictions caused by China's swelling foreign reserves by making it easier for investors to invest overseas. Until now, the only way for individuals to invest in foreign companies was via mutual funds set up by banks and fund managers under the qualified domestic institutional investor scheme.
JP Morgan recently unveiled plans to launch a QDII fund through China International Fund Management, its Chinese JV and the third biggest fund manager in China by assets. Other western asset managment firms have also expressed interest in the QDII market, but to date the scheme has not had a great success with either domestic or foreign firms. More here.
Although this latest change will enable Chinese citizens to invest directly in all HK-traded securities, investors are expected to focus on Chinese companies, which trade at an average 50% discount to the mainland, says the Financial Times.