QFII refers to the conversion of foreign-funded institutions to RMB direct investment in A shares after they have received approval to raise US dollars.
RQFII (small QFII) refers to overseas RMB investing in A shares through Chinese-funded securities companies and fund companies in Hong Kong.
What does the foreign exchange bureau mean by its big trick? We know that foreign capital is an important part of long-term capital of A shares. One of the ways to improve the mechanism is to encourage foreign capital to enter the market by adjusting the system of qualified foreign institutional investors (QFII).
On January 14, the foreign exchange bureau raised the QFII quota from $150 billion to $300 billion. According to the official website of the foreign exchange bureau, by the end of August this year, 292 QFII institutions had received a total foreign exchange investment of $111.376 billion and 222 RQFII institutions had received a total investment of RMB 69.33 billion.
This time, the Foreign Exchange Administration simply lifted the restrictions on foreign investment. The intention is obvious. It encourages foreign investors to buy A shares at the bottom. At present, A shares have just stood at 3000 points. After a fantastic start in early September, they have won Liulianyang in the near future.
As soon as the foreign exchange bureau news came out, the A50 rose sharply.
Lets see what the Foreign Exchange Administration has said.
Foreign Exchange Administration: Elimination of Investment Limits for Qualified Overseas Investors
Expanding the Opening-up of Financial Markets
According to the Foreign Exchange Administration, the QFII system is one of the most important systems for opening up Chinas financial market. Since the implementation of QFII system in 2002 and RQFII system in 2011, more than 400 institutional investors from 31 countries and regions have invested in Chinas financial market through this channel. While sharing the achievements of Chinas reform and opening-up and economic growth, they have also actively promoted the healthy development of Chinas financial market.
Over the years, the State Administration of Foreign Exchange (SAFE) has been actively promoting the opening of financial markets to the outside world on the premise of effectively preventing risks, and continuously promoting the reform of foreign exchange management of the QFII system. The relevant exchange restrictions were abolished in 2018.
At the same time, the State Administration of Foreign Exchange is submitting to the State Council for cancellation of the corresponding administrative licensing projects in accordance with the procedures. After approval, the relevant administrative licensing projects will be announced by the State Council.
Question: What is the background of abolishing the investment quota restrictions of QFII and RQFII?
In recent years, the State Administration of Foreign Exchange has earnestly implemented the deployment requirements of the Central Committee of the Party and the State Council on promoting a new pattern of comprehensive opening up, deepened the reform of the system of qualified foreign investors, improved prudent management, abolished the restrictions on the proportion of remittances, abolished the requirements for the lock-in period, and allowed qualified foreign investors to hold certificates on their behalf. Foreign exchange hedging of securities assets in China greatly facilitates foreign investors to invest in domestic financial markets. Subsequently, mainstream international indices such as MSCI, FTSE Russell, S&P Dow Jones and Bloomberg Barclays have incorporated Chinas stock and bonds into their index system, and steadily increased the weight of inclusion. Foreign investorsinvestment demand for Chinas financial market has increased accordingly.
The abolition of the investment quota restriction for qualified foreign investors is a major reform of the State Administration of Foreign Exchange in implementing the decision-making and deployment of the Central Committee of the Party and the State Council, deepening the reform and opening-up of financial markets and serving the new pattern of overall opening-up. It is also a major initiative launched by the State Administration of Foreign Exchange to further meet the investment needs of foreign investors in Chinas financial Reform initiatives.
Q: After the abolition of investment quota restrictions, what foreign exchange management procedures should QFII follow in investing in domestic securities markets?
Question: Will the pilot country and region restrictions on qualified foreign institutional investors (RQFII) be lifted?
A: Yes, when the investment quota limit for qualified foreign investors was abolished, the RQFII pilot countries and regions were also abolished. We welcome qualified overseas institutions from all over the world to use overseas RMB for domestic securities investment. The abolition of restrictions on RQFII pilot countries and regions will further facilitate foreign investors to invest in domestic securities markets and enhance the depth and breadth of Chinas financial market opening.
This time the foreign exchange bureaus big move is simply three cancellations
u2014u2014 Abolish the total investment quota of QFII and RQFII;
u2014u2014 Canceling the filing and approval of the quota of individual overseas institutional investors;
u2014u2014 Remove restrictions on RQFII pilot countries and regions.
Foreign Capital Continuous Overweight A Share
On September 10, after experiencing the fantastic start in early September, the Shanghai Composite Index rebounded today after six consecutive rises, but still maintained the 3000-point mark.
After the central bank lowered its benchmark on Friday, the S&P Dow Jones Index, one of the international index companies, finally released its list of A-share constituent stocks, with a total of 1099 targets coming into effect on September 23. This is also the Third International Index company to include A shares after MSCI and FTSE Russell. According to the agencys calculation, this years three major indices are expected to bring foreign capital entry scale to 100 billion yuan, A shares will usher in a period of intensive allocation of foreign capital.
With a series of news coming to the ground one after another, the realization of the 6 Lianyang Shanghai Stock Index will usher in an opportunity to hit and stabilize 3000 points. At present, there are already 3500 target points shouted by securities firms.
Morgan Stanley expects foreign inflows of A shares to reach $70 billion to $125 billion in 2019. Over the next 10 years, FDI inflows are expected to be between $100 billion and $220 billion annually.
As another important component of foreign investment, QFIIs position has also changed significantly. As of August 30, among the A-share listed companies that have issued semi-annual reports, QFII holds 293 positions, with 144 holding more than 1% and 21 holding more than 5%. Fifty-five listed companies have been augmented by QFII, and the number of holders has increased considerably compared with 248 in 2018. Excluding banks and non-bank financial stocks, Baotou Steel, China Construction, Haier Wise, Jiangsu Lease and Baosteel are among the top five QFII positions.
The latest QFII investment quota approval form released by the Foreign Exchange Administration shows that in the first eight months of this year, the new QFII investment quota has exceeded $10 billion, more than three times that of the same period last year. The opening up of Chinas QFII policy is continually increasing.
As of last week, the latest stock holding value of Beisheng Capital has officially exceeded 1.1 trillion yuan, reaching 1.15 trillion yuan, a record high, an increase of 5.54% over the previous weekend. For the first time in nearly a year and a half, the value of Shanghai stock market holdings exceeded 700 billion yuan, and that of Shenzhen main board holdings reached 23.18 billion yuan. The value of small and medium-sized board holdings and GEM holdings rose to 138.026 billion yuan and 66.053 billion yuan, respectively.
As of September 10, the net inflow of funds from Beihang was 2.378 billion yuan today, which was 9 consecutive days.
QFIIs Latest Heavy Warehouse Stock
The semi-annual report of listed companies shows that by the end of June, QFII institutions have emerged as the top ten circulating shareholders of many listed companies, with a total position of more than 100 billion yuan. In addition to the strategic investment of some institutions in bank stocks, white horse blue chips are favored and heavily invested by QFII, including Hengrui Pharmaceuticals, Mei Group, Gree Electrical Appliances, China Travel, Guizhou Maotai, Conch Cement, Haikang Video, Shanghai Airport, Ningde Times, Chongqing Beer, Qixing Chen and so on. Endowment.
Source: Wang Xiaowu_NF, Responsible Editor of China Foundation Newspaper