A flood of Chinese money is about to hit India's stock market. At least that is the partisan angle taken by Indian website Daily News & Analysis, on Friday's liberalisation of China's Qualified Domestic Institutional Investors scheme for domestic investors.
Prior to the rule change, Chinese investors could only invest in unexciting foreign fixed-income and money-market products through the QDII scheme.
Now, the range of allowed investments has been expanded to include overseas equity markets -- although I suspect that India will not be the first port of call for most of this hot money.
The most obvious destination is Hong Kong, of course. Indeed, Hong Kong's China stocks hit a record high today as investors bet on rising fund flows from across the border after the rule change.
Officials hope that the loosening of restrictions may cool down China's overheating domestic market by allowing domestic investors to tap into equity markets overseas.
The change allows Chinese banks to invest up to 50% of its overseas investment in stocks, with a single stock capped at 5% of a product's asset value.
The liberalisation is good news for foreign fund managers because it means they can tap into China's $2,000bn in retail bank deposits without having to set up domestic operations.
Previously, big western fund managers like Fidelity International had steered clear of China's fledgling retail fund management sector because they were obliged to set up JVs with local partners.
More than $100bn of investments could be channelled through the QDII programme during the next two years, according to a research firm quoted in this Financial Times article.
