From system improvement to product implementation, China’s institutional opening-up of the capital market has made continuous achievements in recent years. Recently, the special meeting held by the financial stability and Development Commission of the State Council once again released a positive signal of the two-way opening of China’s capital market. It is worth noting that due to the influence of multiple non economic factors, the A-share market has experienced great shock recently, but the short-term fluctuation does not change the long-term trend. Foreign institutions still affirm the long-term investment value of the A-share market. A number of foreign-funded institutions said that positive policy signals have emerged and are optimistic about the allocation value of China’s equity assets in 2022.
capital market connectivity welcomes new breakthroughs
On March 16, the financial stability and Development Commission of the State Council held a special meeting and pointed out that with regard to China concept shares, the regulatory authorities of China and the United States have maintained good communication, made positive progress and are working to form a specific cooperation plan. The Chinese government continues to support all kinds of enterprises to list abroad. The CSRC also held a meeting to convey, study and implement the spirit of the meeting of the financial stability and Development Commission of the State Council. The meeting pointed out that efforts should be made to promote the implementation of new regulations on the supervision of overseas listing of enterprises, support all kinds of qualified enterprises to list abroad, and maintain smooth channels for overseas listing.
The good news of Chinese enterprises “going out” abroad came again a few days ago. After the London Stock Exchange, the Swiss stock exchange has become another important listing place for Chinese enterprises to list in European GDR (Global depositary receipts) Ningbo Shanshan Co.Ltd(600884) 3 announced on March 18 that the company plans to issue GDR overseas and list on the Swiss stock exchange. Previously, Sany Heavy Industry Co.Ltd(600031) , Gotion High-Tech Co.Ltd(002074) , Lepu Medical Technology (Beijing) Co.Ltd(300003) also announced that it planned to issue GDR overseas and list it on the Swiss stock exchange. “This fully demonstrates the openness and innovation of China’s capital market interconnection reform.” Gf Securities Co.Ltd(000776) strategy team said that on the one hand, promoting the “going global” cross-border financing and future M & A and other capital operations of Chinese enterprises with global competitiveness will help establish the benchmark image of Chinese high-quality enterprises in the international capital market; On the other hand, GDR is also a new channel for foreign capital to flow into a shares, which is conducive to optimizing the investor structure.
According to the CSRC, since the introduction of relevant policies and supporting rules of Shanghai Luntong in 2018, four listed companies on Shanghai Stock Exchange have successfully issued GDR and listed on London Stock Exchange, which has played a positive role in broadening two-way financing channels and supporting the development of real economy.
In recent years, the two-way opening of China’s capital market and a number of reform measures have been successfully implemented. The “Introduction” and “going out” go hand in hand. In addition to the continuous promotion of GDR issuance of Chinese enterprises, MSci (Mingsheng) and other international index companies have successively incorporated Chinese A shares into their index system; The restrictions on the proportion of foreign shares in the three major fields of securities, funds and futures were fully liberalized, and a number of foreign-funded institutions accelerated the layout of the Chinese market. In terms of system, in addition to the regulatory provisions on interconnected depositary receipts, the system rules of QFII (qualified foreign institutional investors) and rqfii (RMB qualified foreign institutional investors) have also been further revised to expand the scope of application, and the regulatory arrangements have been continuously optimized.
“On the whole, the two-way opening-up of China’s capital market has made some progress. On the one hand, the investment of A-Shares by international institutions has been increasing, and the level of market institutionalization has been continuously improved; on the other hand, Chinese enterprises have also been actively listed in overseas capital markets.” Fu Lichun, founding partner of Yuntai capital, told the reporter of Economic Information Daily that the current external turmoil and recent A-share market fluctuations also show the necessity of accelerating the internationalization process of China’s capital market.
“To promote institutional two-way opening-up, we need to continuously improve the capital market ecology. Only by truly establishing a healthy capital market ecology with perfect financing functions, solid basic systems, effective market supervision and effective protection of the legitimate rights and interests of investors, can we effectively attract foreign high-quality financial institutions to enter, so as to form a virtuous internal and external cycle.” Kang Yong, chief economist of KPMG China, told reporters that at the same time, it is also necessary to strengthen the construction of financial infrastructure, enrich risk management tools, and accelerate the connection with the prevailing rules of the international capital market, so as to form an efficient, standardized, dynamic and fair competition market environment.
foreign institutions are still optimistic about the A-share market
The institutional two-way opening of China’s capital market has a firm pace and sufficient quality. In this context, despite the recent large adjustment of the A-share market, many foreign-funded institutions are still optimistic about China’s economy and the long-term allocation value of China’s assets.
“Overall, we have observed positive policy signals, and the further implementation of supporting policies is expected to attract overseas investors to return to the A-share market.” Meng Lei, China strategy analyst at UBS Securities, said that if China and the United States can reach a cooperation agreement on cross-border audit supervision, the trend of withdrawal of foreign capital from China is expected to be reversed. Goldman Sachs report also said that at present, it still maintains “over allocation to the Chinese market”.
“After this round of decline, the advantage of undervalued value of China’s stock market is expected to be more obvious. Undervalued value is expected to provide more space for China’s stock market performance in the future.” Citigroup further said that despite the recent outflow of foreign capital, overseas funds will continue to flow into China in the future, benefiting from the interest rate gap between China and the United States, China’s long-term investment opportunities and the global allocation demand of overseas funds.
In fact, in the past five trading days of the week, the net selling amount of northbound funds continued to narrow, and then turned into a net buying trend. According to wind data, as of the closing on March 18, in the last five trading days, northbound funds bought a net of -14.408 billion yuan, – 16.024 billion yuan, – 82 million yuan, 5.365 billion yuan and 8.457 billion yuan respectively. Previously, from 2016 to 2021, northbound funds maintained net purchase for six consecutive years.
Wang Ying, China equity strategist at Morgan Stanley, said that the recent heavyweight meeting mentioned the issues most concerned by the market and took a positive view of these statements. The Hang Seng Index has rebounded sharply above the target level assumed in the previous pessimistic scenario, and A-Shares also rose. At present, it will still be a long way for the index to return to the target level under the basic scenario assumption, but the path is clearer than ever. At present, the standard configuration of China’s stock market is maintained. If there are further positive trend changes in the future, the rebound may be more sustainable.
