QFII accounts increase again

Overseas investment groups operating under China's QFII scheme opened 24 new accounts to trade yuan-denominated shares at markets in Shanghai and Shenzhen during July, bringing the total number to 490, the Shanghai Securities News reported Friday, citing figures from the China Securities Depository and Clearing Corporation Limited.

July was also the 19th consecutive month to witness the opening of new QFII accounts, the official paper mentioned.

Moves allowing highly capitalized foreign investors greater access to Chinese mainland stocks and bonds have historically been accompanied by rushes of investment enthusiasm among local capital holders. Yet, analysts urged caution and pointed out that the growing number of new QFII accounts should not be taken as an endorsement of the mainland stock markets.

"Just because a qualified foreign investor opens an account, that doesn't mean it is about to fill it with cash and start actively managing it," Zhang Xin, an analyst from Guotai Junan Securities, told the Global Times.

Liu Feng, an adjunct professor at McGill University, echoed Zhang's sentiments and pointed out that most institutions operating under the QFII program have utilized only a fraction of their investment quota.

"Most overseas investors are actually reluctant to enter the mainland stock market in light of recent sluggishness," said Liu, who added that a lack of transparency and an immature regulatory environment were also keeping foreign investors at a distance.

But the fact that QFIIs continue to open new A-share accounts indicates that these investors are eager to secure a place at the table for when a good opportunity does present itself, Liu went on to say.

Since its introduction in 2002, the scope of China's QFII program and related schemes have expanded considerably amid government efforts to reform the capital market. Last month, the State Administration of Foreign Exchange (SAFE). China's foreign exchange regulator and the agency charged with dispensing quotas to overseas investors, granted $1.49 billion in new QFII quotas. The administration also extended 17 billion yuan ($2.78 billion) in new quotas under the RQFII program, a scheme which allows foreign investors to direct offshore yuan into shares and debt securities on the mainland.

Meanwhile, the China Securities Regulatory Commission, the country's securities regulator, announced on July 12 that it had raised the total QFII investment ceiling to $150 billion. The commission stated as well that pilot testing of its RQFII scheme would expand beyond Hong Kong to other major markets, including Singapore and London.