Salient to Investors:
China is to cut the minimum requirement on assets under management to $500 million from $5 billion for foreign institutional investors looking to buy publicly traded securities in mainland exchanges and invest in the interbank bond market. Foreign investors will now be required to have at least two years of operational experience, lowered from five years. Qualified investors can now hold a combined maximum 30 percent stake in any single yuan-denominated stock, versus 20 percent previously.
The Shanghai Composite Index is down nearly two-thirds from its high in October 2007. Shanghai stocks trade at 9.89 times estimated earnings versus 7.65 times for the Hang Seng China Enterprises Index of Hong Kong-listed Chinese companies.
Chen Liqiu at Jianghai Securities said the move to lower the threshold may have limited effects on the market because valuations of yuan-denominated shares are not attractive as Chinese equities in other overseas markets. Chen said H-shares are more appealing to foreign investors as their valuations are lower.
Hui Miao at Deutsche Bank said Chinese insurers and brokerages will benefit most from the plan because of potential capital inflows.