China investment has never been easier

Now in its fourth year, Standard Chartered’s annual RMB Investors Forum survey gathers the views of investors, regulators and custodians in Asia, Europe and North America on the issues impacting investors who want to access China’s onshore markets.

This year’s survey was carried out against a challenging market backdrop for China investment. The ongoing trade tensions between the United States and China have rattled markets across the globe and caused a short-term pick-up in outflows. More positively, regulatory barriers to China investment are falling and index inclusion is gathering pace for both equities and bonds.

This latest survey shows that investors remain confident about investing in China. In addition, onshore markets are attracting a broader investor base including retail accounts.

Furthermore, what is clear from the survey results is that investor confidence in China remains robust and the case for investing in China continues to be strong, with 86 per cent of respondents now investing in China.

Regulatory action encourages China investment

One driver of the continued confidence is the efforts of regulators and exchanges over recent years to liberalise China access. For example, only 24 per cent of investors are concerned about regulatory uncertainty in 2019, down from 43 per cent last year. These changes are attracting a broader sweep of investors – including a significant showing from the retail sector – and generating new strategies as investor knowledge and sophistication increase.

This trend has been bolstered by the ongoing efforts of regulators to reform the many channels that offer access to China. For instance, while Stock Connect and Bond Connect still attract the majority of investment flows, with 59 per cent of investors using Stock Connect and 53 per cent using Bond Connect, the proposal earlier this year to merge and liberalise the Qualified Foreign Institutional Investor (QFII) and its renminbi equivalent (RQFII) shows that China’s watchdogs remain committed to improving access across all mechanisms. Moreover, 79 per cent of those surveyed said proposals to extend eligible assets for QFII and RQFII was the most important policy announced in the last 12 months.

Managing FX risk a top concern

Importantly, the wave of index inclusions that started last year with the addition of A-shares to the MSCI Emerging Markets Index and has now expanded to include the Bloomberg Barclays Global Aggregate Bond Index and the FTSE Global Equity Index Series, has accelerated the removal of regulatory barriers, and played a critical role in raising investor awareness.

Of course, challenges remain for investors wanting to access China’s markets. From the survey it is evident that investors want better market infrastructure to help them manage FX risk, with 29 per cent citing it as their top concern, second only to the US-China trade tensions at 38 per cent. In addition, index inclusion is yet to deliver the expected inflows to onshore assets, with only 11 per cent survey respondents indicating that inclusion influenced their decision to invest.

Despite the obstacles, signs are that China investment is still attracting new investors, products and strategies that will power inflows and spur market reform. China investment has never been easier.

To read the 2019 RMB Investors Forum Whitepaper ‘Breaking down barriers: China investment has never been easier’ please fill in the form below.

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CCIB News & ViewsSIBOS 2019