First-ever margin trading and securities lending deals by QFII investors completed in China
Updated 19:45, 30-Dec-2020
China further expands QFII's investment scope. /CFP

China further expands QFII's investment scope. /CFP

The first-ever margin trading and securities lending deals by qualified foreign institutional investors (QFII) in the Chinese mainland stock market have been completed, several brokerage firms said on Tuesday.

On December 28, CITIC Securities, Guotai Junan Securities, and Huatai Securities announced that they have successfully opened the first batch of margin trading and securities lending accounts for QFII or RMB Qualified Foreign Institutional Investors (RQFII) customers in the A-share market.

On December 29, UBS AG completed multiple securities lending transactions through the QFII account on the first day of market trading. 

China has further expanded QFII's investment scope to further open up its capital markets. On September 25, China Securities Regulatory Commission, People's Bank of China, and State Administration of Foreign Exchange released the Measures for the Administration of Domestic Securities and Futures Investment by QFII and RQFII, which took effect on November 1, 2020.

The measures combined QFII and RQFII qualifications and system rules into one, further expanding the scope of investment.

Launched in 2002, the QFII program allows certain licensed international investors the opportunity to invest in China's stock exchanges buying and selling yuan-dominated shares, or known as A-shares, of Chinese companies. Its yuan-denominated sibling, RQFII, which was adopted in 2011, imposes fewer restrictions on overseas investors and makes it easier for direct investment in China's domestic capital markets. Both programs are examples of China's continuous efforts into opening its financial market. 

UBS said demand from global investors for China A-share investments continues to grow at a very fast pace. "Allowing institutional investors to access the onshore securities lending and borrowing market thus facilitating low net-investment strategies is a major development and will support the growth and diversification of investment strategies," said Tim Wannenmacher, head of Asia-Pacific Financing and co-head of Distribution at UBS. 

"Following the launch of Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and the inclusion of A-shares in three major international indices, this latest relaxation of QFII rules will further boost the inflow of foreign capital. It is important because foreign participation in China's onshore securities lending and borrowing market enhances the 'price-discovery' function of the stock markets," said Tommie Fang, head of China Global Markets and QFII Representative at UBS.

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