Chinese President Xi Jinping speaks during an event marking the 40th anniversary of the embassy to compatriots in Taiwan. Pool/Getty Images
Beijing is restricting access to foreign securities for Chinese retail investors, the Financial Times reports.
Domestic markets have suffered massive outflows as domestic traders flee to offshore securities.
About a third of funds that invest in foreign stocks and bonds have either limited or suspended their sales.
Authorities in Beijing, China, are restricting domestic investors’ access to offshore markets in a bid to breathe new life into stuttering Chinese stock markets.
Around 30 percent of funds that offer investments in foreign securities have either paused or restricted sales to retail investors. Some brokerage firms have received informal instructions from the Shanghai Stock Exchange, the reports Financial Times.
Participants include companies such as China Asset Management and Bosera Asset Management. Bosera Asset Management suspended subscriptions to two investment funds tracking the US Nasdaq and S&P 500 (Bloomberg reported).
The restrictions in China come at a time when Chinese investors are yearning for the US stock rush. The most important indices have reached new highs in the last few days. In contrast, Chinese markets are trading at five-year lows. The reference index CSI 300 has already lost four percent this year.
Read too
Deflation threatens to paralyze China’s economy in the long term – which is why it is also dangerous for the West
China’s investors rely more on foreign stock markets
The decline reflects investors’ waning confidence in China’s ability to manage its economy. Beijing is struggling with slower growth, a real estate crisis, high unemployment and disinflation.
Outflows further accelerated due to the structure of offshore retail investments in the country. Traders can only invest through China’s Qualified Domestic Institutional Investor Program.
Since this regulation imposes a quota on the offering of foreign stocks and bonds by brokers, it has created a sense of scarcity. This is fueling competition for securities outside China, reports the Financial Times. In China, investors have generally shown an increasing preference for foreign markets over the past year. A record 49 such funds were launched in 2023.
In addition to US investments, retail investors in China have also shown a keen appetite for exposure to Japan’s Nikkei index. Funds with a focus on India also rose.
In addition to promoting funds to curb offshore investments, authorities are considering a $280 billion (almost €257.6 billion) market support program, with funds drawn from offshore accounts of state-owned companies.
China’s economy is also set to receive a $140 billion (128.8 billion euros) liquidity boost as authorities announce a cut in banks’ required cash reserves.
This text was translated from English by Muriel Dittmar. You can find the original here.
Read too
Markets are in a “new geopolitical environment” with ongoing risks, according to asset manager Blackrock