Posted inChina

China extends futures offerings to foreign institutions

Qualified institutional investors are now allowed to trade commodity futures, commodity options and stock index options.
Statistic graph index of stock Market Exchange on a skyscraper in hong kong background

The five China futures exchanges announced on Friday evening that investors under China’s Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) schemes are now allowed to trade onshore derivatives.

Eligible investors can now invest in 23 commodity futures including crude oil, gold, methanol and iron ore; 16 option contracts; and stock options listed on the China Financial Futures Exchange.

The plan to allow foreign investors to trade options and futures was first pencilled in in October last year, but it was only last week that the authorities announced which products can be traded through the scheme.

When the China Securities Regulatory Commission (CSRC) last updated the list of QFII institutions in December 2020, there were 558 institutions under the scheme.

There were 244 RQFII institutions when the regulatory watchdog last updated the list in August 2019.

Banks that are already qualified to conduct futures margin depositary business for domestic clients on the five different exchanges can also take futures margin deposits for QFII and RQFII.

Entities that are entrusted to trade commodity futures for foreign investors shall open accounts on their behalf in compliance with rules and guidelines set out by the China Futures Market Monitoring Centre.

China now has five futures exchanges: Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange, China Financial Futures Exchange and Shanghai International Energy Exchange.

Speaking at a financial forum on Friday, Fang Xinghai, vice-chairman of the CSRC, said foreign investment in China’s capital markets has showed “obvious resilience”.

He noted that as of August 26, the total amount invested by foreign investors in the stock index futures market was RMB31.76bn, while for commodity futures, this totalled RMB21.30bn.

Further opening-up measures

Fang added that the CSRC will continue to launch more opening-up measures, including further broadening the scope of the Stock Connect scheme between the Hong Kong stock exchange and its counterparts in Shenzhen and Shanghai.

Mainland Chinese investors will soon be able to invest in foreign companies who have a primary listing in Hong Kong via Southbound trading, while investors will be able to trade further companies listed on the Shanghai and Shenzhen stock exchanges via Northbound trading, said Fang.

“The inclusion of foreign companies in Southbound trading of Stock Connect is a significant breakthrough in broadening the mutual access scheme and augmenting the attractiveness of our stock exchange as a leading destination for fundraising by international companies,” Julia Leung, acting chief executive officer of the Securities and Futures Commission, said.

“The SFC will be working closely with the CSRC, Hong Kong Exchanges and Clearing and its mainland counterparts to determine additional securities eligible for inclusion in both trading links.”

In July, Hong Kong and mainland Chinese authorities expanded Stock Connect to include ETFs listed on both Hong Kong and mainland China exchanges.

Part of Mark Allen.