Access to China Market
QFII & RQFII introduction
Currently, the China capital markets offer limited access to foreign investors. Under current regulations in China, foreign investors can invest only in the domestic securities market through certain foreign institutional investors that have obtained Qualified Institutional Investor (“QFII”) or a Renminbi Qualified Institutional Investor (“RQFII”) status from the CSRC and have been granted a quota by SAFE to remit foreign freely convertible currencies (in the case of a QFII) and RMB (in the case of a RQFII) to China for the purpose of investing in the China’s domestic securities markets.
Main Comparison between QFII & RQFII
|RQFII Mutual Funds||QFII Mutual Funds|
|Lock-up period||N/A||3 months|
|Repatriation frequency||Daily: real time inflow and outflow||Weekly|
|Aggregate granted quota||RMB 311.50 billion||USD 69.72 billion|
Source: State Administration of Foreign Exchange ("SAFE"), as of 28 February, 2015.
Shanghai – Hong Kong Stock Connect
In addition to QFII and RQFII schemes, foreign investors can also get access to eligible shares listed on Shanghai stock exchange from 17 November 2014 through “Shanghai-Hong Kong Stock Connect”. All Hong Kong and overseas investors can trade Shanghai Stock Exchange (“SSE”) Securities through Shanghai-Hong Kong Stock Connect.
Under Shanghai-Hong Kong Stock Connect, the Stock Exchange of Hong Kong Limited (“SEHK”), and SSE will establish mutual order-routing connectivity and related technical infrastructure (Trading Links) to enable investors in their respective markets to trade shares listed on the other market.
A glimpse of the Shanghai – Hong Kong Stock Connect
|Southbound Trading (investing in SEHK)||Northbound Trading (investing in SSE)|
(100 million RMB)
(100 million RMB)
|Qualified Investors||Institutional Investors, or Individual investors who hold an aggregate balance of not less than RMB500,000 in their securities and cash accounts||Institutional investors & individual investors|
|Eligible Securities for Trading||Constituent stocks of the Hang Seng Composite LargeCap Index Constituent stocks of the Hang Seng Composite MidCap Index. Stocks listed on both SEHK(H share) and SSE(A share)||Constituent stocks of SSE 180 Index
Constituent stocks of SSE 380 Index
Stocks listed on both SEHK(H share) and SSE(A share)
|Trading and clearing Rules||Shanghai-Hong Kong Stock Connect will only operate on a day which is a trading day of both SSE and SEHK and where the clearing arrangements are in order. ChinaClear and HKSCC will establish a direct link for cross--boundary clearing. Each of them will become each other’s clearing participant to provide clearing services for Shanghai-Hong Kong Stock Connect.|
*Facts are subject to change, as of 31 December, 2014.