Source: Bloomberg
Author: kiuyan wong
Four years after the number of Chinese stocks included in the global benchmark index, the fluctuations in the Chinese market highlight the need to prevent risks more widely.
For example, China has nearly 3,000 listed stocks, but only 50 stocks with the highest liquidity are traded.The Shanghai -Hong Kong Stock Connect and Hong Kong Stock Connect cannot use A -share financing and securities securities, that is, it is forbidden to do short transactions.
"If you cannot fully manage your transaction in the market, it will increase transaction costs," Eugene Goyne, the financial supervisory director of Ernst & Young Asia Pacific."There is still a major inhibitory factor in carrying out transactions in the Chinese market."
China is eager to attract foreign investment to its market that is $ trillion, but it is alsoware of its influence.In the past few years, China has canceled the restrictions on overseas investment quotas, and established stocks, bonds and ETFs, and will soon have interchange.However, officials have stated that they will pay close attention to short -term funds that may cause the market.It is still memorable that the stock disaster in 2015 caused more than 1,400 listed companies to suspend trading, the government intervention in the stock market and the foreign exchange market for several months, and launched an investigation to eradicate shorts.
The China -Shenzhen 300 Index of the China Standards has risen by 22%from the low in October last year.
Lyndon CHAO, managing director of the Asian Securities Industry and Financial Market Association's stock and after transaction, said that expanding hedging tools (including financing and securities financing) will be the key to expanding the attraction of global institutional investors in the Chinese A -share market.
"Participants in the A -share market are mostly only more passive index funds and some quantitative funds," he said."If you open up financing and securities, you can attract more active fund managers, including market neutral hedging funds, and they can increase a lot of liquidity to the market. But they need to enter a vibrant securities borrowing environment."
According to the data from the People's Bank of China, foreign investors still have a small share in the Chinese market and hold about 4.7%of Chinese stocks.
MSCI INC. listed four conditions for further included Chinese stocks in 2019.Some of them have been satisfied, including comprehensive transactions that allow transactions for multi -customer accounts that allow single commission to make transactions.The Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Hong Kong Stock Exchange also solve the problem of not matching the market holidays of the two places to a certain extent.
Another breakthrough occurred last year. MSCI launched the China A50 Interconnection Index Futures Transaction on the Hong Kong Stock Exchange to compete with China stock index futures traded in Singapore.So far, Singapore futures still dominate.
Yao Jiaren, co -operating director of the Hong Kong Exchange, said last week that it takes time to establish liquidity. The Hong Kong Stock Exchange must provide a suitable product portfolio and ensure sufficient liquidity to promote transactions.
Other products, including interchangeables, are also brewing. The opening of the exchange will connect Hong Kong and international investors to the interest rate exchange market in China.
In addition, after the official support in September last year, it is expected that more China Treasury bond futures will be launched, thereby increasing another potential hedge tool.According to the Hong Kong Exchange data, as of December 2021, the scale of foreign capital holdings of China Treasury bonds increased from 900 billion yuan in June 2017 to 4.1 trillion yuan.
