A long-term bullish A-share market will be fostered by the removal of quota restrictions for foreign investors announced recently by China's foreign exchange regulator, the China Daily reported Thursday.
The State Administration of Foreign Exchange announced on Tuesday in a statement the cancellation of the maximum investment amount for foreign institutions investing in the onshore markets under two major schemes - the Qualified Foreign Institutional Investor scheme and the RMB Qualified Foreign Institutional Investor scheme.
"The policy will not exert immediate influence. But still the removal of the ceiling is vital, which will bring a continued inflow of overseas capital into the A-share market," said Cao Haifeng, a non-banking financial industry analyst with UBS.
Cao said that leverage businesses, such as derivatives, market making, and prime brokerage, are underdeveloped in China compared with mature markets.
"Given the recent opening-up pace, we can foresee that these businesses will seek much room for growth among the Chinese brokerage firms. Leading securities firms will take predominant advantages thanks to their higher taking, stronger risk control abilities and a larger customer base of institutional investors," he said.
Zhang Yulong, chief strategist of China Securities, said that the currently undervalued industries seeing a pickup in their performance, such as chemical and automobile, are likely to show investment opportunities regarding the latest easing policies.
Jing Ning, Fidelity International Portfolio Manager, said that this policy alone will not create tremendous liquidity flow into the domestic financial markets.
"However, it indicates 'Chinese regulators' determination to further sweeten the infrastructure for foreign investors to get access to Chinese stocks," she said.
