China's financial market opening-up continues to gather steam

The steady opening up of China's financial market has invigorated foreign investors seeking to expand their investment and business horizons in the country, financial experts said on the sidelines of the just-concluded 2023 Global Investor Conference in Shenzhen.

Global investors can now invest in China's capital market through more channels in a more convenient way, and are happy to see the further opening-up, Russell Jacobsen, head of China Access & Strategic Development, Equities Product at HSBC, told Xinhua.

Since the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect schemes were officially launched, the accessibility of China's equity market has greatly improved, and the schemes have witnessed an expansion of eligible shares recently.

On March 13, the number of stocks eligible under the Shanghai-Hong Kong Stock Connect increased by 598 to 1,192, taking up over 90 percent of the market capitalization. Meanwhile, 436 shares were added to the Shenzhen-Hong Kong Stock Connect, bringing the total number to 1,336, covering 86 percent of the market capitalization.

The recent expansion has been greatly welcomed by overseas investors. Data showed that the net inflow to newly-added shares has reached 2.5 billion U.S. dollars, accounting for more than half of the total inflow of northbound funds since the expansion.

Jacobsen said he hopes that regulators and exchanges will continue to consider accelerated inclusion of a wider range of stocks, bonds and ETFs on a two-way basis.

The Stock Connect program has also made enhancements to the trading calendars. Starting from April 24, investors are allowed to trade on all days when both the Chinese mainland and Hong Kong markets are open. It is hailed as a significant move to promote high-level two-way opening up of the capital market.

The move can help investors obtain more investment opportunities in different trading hours and reallocate their asset portfolios, said Charles Lui, Managing Director of Optiver China.

China has also made remarkable progress in opening up its bond market. It approved a bond connect program between the Chinese mainland and Hong Kong in 2017, allowing investors from both sides to trade bonds on each other's interbank markets.

Bond Connect has continued to operate in a stable and efficient manner over the years. By the end of 2022, bonds worth 3.46 trillion yuan (about 487.7 billion U.S. dollars) were held by foreign institutions in the Chinese bond market, with an average annual growth rate of nearly 25 percent in the past five years, official data showed.

China has taken another major step in the opening up of its financial markets with the launch of Swap Connect, an interest rate swap market access scheme between the Chinese mainland and Hong Kong, in May.

With institutional arrangements made in trading, clearing and settlement, investors will be able to participate in derivatives markets on both sides without changing their existing trading practices, according to the People's Bank of China.

Besides these connect mechanisms, A-share listed companies are issuing Global Depository Receipts (GDRs), which not only provide new paths for Chinese firms to access overseas markets but also allow overseas investors to participate in the domestic market in new ways.

Data showed that as of April 13, 14 companies have successfully issued GDRs, raising over 5 billion U.S. dollars in total, with an average of 360 million U.S. dollars each. The Shenzhen Stock Exchange pledged to steadily promote listed companies to issue GDRs overseas.

For investors, the access threshold of GDRs is relatively more flexible, and it can also help A-share listed companies expand the coverage of target international investors, William Ng, Managing Director of Deutsche Bank, said at the conference.

In a nod to the unremitting opening-up of China's financial market, major global benchmarks like MSCI, FTSE Russell, and the S&P Dow Jones have included the A-shares and strengthened their weightings. China's government bonds also made their way into major global bond market indices.

With the scrapping of ownership caps for foreign institutions for securities, futures and funds, many global financial institutions expanded their footprints in China, a token of their faith in the country's continued financial opening.

The China Securities Regulatory Commission announced last Friday that it has given approval for Morgan Stanley to set up a futures unit in China.

The commission will continue to deepen the opening-up of the futures market, support qualified overseas institutions to invest in domestic futures companies, constantly improve the quality of the futures market, and serve the high-quality development of the real economy.