(Yicai Global) June 14 -- China’s securities regulator is working with the two mainland stock exchanges to see how they can increase their shares’ MSCI inclusion factor to 15 percent, its vice chairman said today.
The trio are studying a price forming mechanism for the close of trading and a standardized stock suspension and resumption system, Fang Xinghai said at the Lujiazui Forum without disclosing further details. They are also looking at allowing foreign institutions and private investors to trade stock index futures.
Mainland shares, known colloquially as A-shares, joined the MSCI Emerging Markets Index on May 31 with an inclusion factor of 2.5 percent, to be increased to 5 percent at the end of August. Joining the index was just one step China has made as it presses ahead with reforms to open up the world’s second biggest finance sector to other countries around the globe.
Between May 31 and June 11, the average net inflow of funds through the Shanghai- and Shenzhen-Hong Kong Stock Connect programs was 1 percent higher than over the first five months, Fang said. The two schemes grew steadily in size with accumulated trading volume reaching CNY10 trillion (USD1.56 tillion), he added.
The Shanghai-London Stock Connect is also about ready to go, Fang continued, saying operational arrangements are underway and the project is set to go live within the year.
He also said international institutional investors he has spoken to are excited about changes to China’s dollar- and yuan-based Qualified Foreign Institutional Investor schemes, which took effect on June 12, the same day they were announced. The new rules remove the 20-percent repatriation limit on the dollar-based program and three-month lockup periods for both schemes, while also allowing forex hedges.
The dollar-based QFII program grants licensed overseas investors access to China’s yuan-based capital market, while its sister scheme (known as the RQFII) lets institutions invest in the mainland’s onshore market using offshore yuan deposits.