China Widens Access to Capital Markets

SHANGHAI?China is expected to allow foreign investors to trade in the country's nascent stock index futures market by the end of January, people briefed on the discussions said, further widening access to the nation's fast-expanding capital markets.

The China Financial Futures Exchange, which hosts and oversees trading of stock index futures, is set to unveil the first batch of qualified foreign investors within weeks, the people said. This comes after the country's foreign-exchange regulator released guidelines on bank-account opening procedures for such trading, a move widely seen as removing the last regulatory hurdle for foreigners to trade stock index futures, the people said.

The futures exchange is expected to initially pick about 10 investors under China's Qualified Foreign Institutional Investor program?the primary channel for foreigners to invest in stocks and bonds in China, known as QFII?for participation in the stock index futures market, said one of the people.

The authorities will likely adopt a cautious approach in selecting the first batch of QFIIs and will favor larger, more established and long-term investors, they said.

"As far as we know, CFFEX has already completed all necessary preparatory work for QFIIs' trading of stock index futures and there are no more technical or policy obstacles for the issue," said another person.

Faced with a sagging stock market and slowing capital inflows, China has stepped up efforts in recent months to woo more foreign investors to its capital markets. Authorities have expanded the quotas for the QFIIs as well as broadened their scope of investment.

China's stock markets have been sluggish in recent years, plagued by a glut of new offerings and a slowing domestic economy, with the benchmark Shanghai Composite Index losing 1.7% so far this year. It fell 22% in 2011.

In early 2011, the China Securities Regulatory Commission said it would allow QFII investors to take part in stock index futures trading. Foreign investors have since been waiting for the release of necessary complementary rules from other authorities, including the central bank and the country's foreign-exchange regulator, that address technical barriers, such as accounts opening, for foreign investors.

The authorities started laying the framework for QFII investors' trading of stock index futures in July and virtually completed the relevant technical preparation when the country's foreign exchange regulator released Friday specific guidelines on how QFIIs can open special bank accounts for such investment.

China launched its stock index futures market in 2010, offering investors a venue to shield themselves against the volatility in the share market.

Source: http://online.wsj.com/article/SB10001424127887324461604578188860289381132.html?mod=rss_asia_whats_news

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