China's economic story fundamentally appealing

LONDON -- International investors are showing greater interest in Chinese capital market, despite a slower growth of its economy, said Alexander Justham, chief executive officer (CEO) of the London Stock Exchange (LSE), in an interview with Xinhua.

Chinese economic development has entered the so-called "new normal" and shown a slowdown in growth, but its fundamental story is "absolutely of interest", as the global investment community is still interested in and focuses on assessing Chinese capital market, Justham said.

The LSE CEO will visit China later this week and kick off the London Stock Exchange Group Beijing IPO Conference on Oct 9.

Right way and time

Justham said, "China is the second largest economy in the world. The statistics show that the foreign ownership inside China's stock is very low, so the global investment community is clearly underweight in China in terms of the scale of economy versus the scale of investment, I think that fact will drive investment for a very long time."

The investment from global investors will also detect the pace of opening up of capital market, the capital flows, like the licenses and quotas of the RQFII (RMB Qualified Foreign Institutional Investors), said Justham.

The Shanghai-Hong Kong Stock Connect, which offers the seamless inter-investment channel between the two stock markets, is another way of expanding access to the capital market of the Shanghai Stock Exchange, and the global investors are very interested to watch, as lots of them do have access in Hong Kong, said Justham.

"In all these contexts, the non-China investment community is trying to work its way out on how to find the right way and the right time to expose to China. And more importantly, they will take longer time to find the levered exposure into China in order to commence scale of economy," he said.

Regarding the pace of opening up the capital market, Justham commented that the opening up of China's capital market needs to take time and to be "definitely managed," as the wider access to capital flows can have various impacts.

"You always want to avoid the problems that come with that, and the Chinese authorities have their plan, and they are also on the course," he said.

RMB business booming

As of the end of September, 60 Chinese companies are now quoted on the LSE, with seven on the Main Market, and 53 on Alternative Investment Market (AIM), or start-ups sector.

Regarding the Renminbi (RMB) investment vehicles, four RQFII Exchange Traded Funds (ETFs) and dozens of RMB bonds are now listed or traded on the bourse.

Though the number of China-A share linked RMB ETFs is tiny compared to the more than 1,000 ETFs now listed on the LSE, the bourse is bullish on its outlook.

"The (RMB investment) products are new, but they are all going well, and are all successfully subscribed. We understand that people are looking forward to more ETFs here, or other instruments with exposure to China's market, and we are of course looking to see more in the future," said Justham.

"I think fundamentally the investment community here in Europe and in London is interested in finding ways to buying into or expose into China, and the RMB trading is skyrocketing, I think this is the fundamental change," he added.

In order to better facilitate the RMB trading in London, in the context of the China-Britain financial cooperation deepening, the LSEG signed the Memorandum of Understanding (MoU) with the Bank of China, Agricultural Bank of China and China Construction Bank this year.

"What we are trying to do is to insure the infrastructure for trading and other components of that such as settlement and clearing can really efficiently work. For the wider group's role is to provide efficient infrastructure for communities here and for Chinese companies as well for accessing the financial market here," said Justham.

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