Nation to welcome more foreign cash into capital market

China will quicken the opening up of the capital market in 2013, by attracting more foreign investors and facilitating the development of asset management and futures businesses, the country's top securities regulator pledged on Tuesday.

"The investment quota for Qualified Foreign Institutional Investors (QFII) and Renminbi-QFII (RQFII) will continually expand in order to satisfy the growing overseas investment demand," said a statement from the China Securities Regulatory Commission, or CSRC.

"The policy to regulate Qualified Domestic Institutional Investors, or QDII, will continue to be improved," it said.

The statement came at the end of the annual CSRC work conference, which set the blueprint for 2013.

"We will accelerate the pilot program for futures companies launching brokerage businesses overseas, support the development of cross-border exchange traded funds, or ETFs, and bond markets," the statement said.

Guo Shuqing, chairman of the CSRC, said: "The opening should speed up. It is impossible to delay the opening based on the current market situation, or we will suffer incredible losses."

He said more foreign institutions, including fund management companies and securities business, will be encouraged to launch asset management services on the Chinese mainland, which can help reduce speculative activities from individual investors, and stabilize the market.

A week earlier, Guo indicated in Hong Kong that foreign investors will be welcome to inject funds into the mainland's A-share market. He looked forward to the likelihood that the QFII and RQFII quotas will increase at least nine to 10 times.

Xu Jian, director of the Financial Research Center under Nanhua Futures Co Ltd, said: "China's stock market is expected to see a huge injection of foreign investment in the coming months, which may boost the benchmark stock index."

In 2012, the Shanghai Composite Index increased by 3.17 percent.

According to the CSRC, the QFIIs had seen a cumulative investment of $37.4 billion as of December, and the quota had been raised to $80 billion last year.

The total quota for RQFII that allows foreign investors to use offshore yuan to buy mainland securities is now 270 billion yuan ($43 billion), compared with the initial 20 billion yuan set at the end of 2011.

Xia Yang, director of the securities department at UBS in China, said QFIIs may get opportunities to invest in stock index futures this year, and develop fixed-income financial products.

The average PE ratio of the mainland stock market is not likely to be influenced by the increasing proportion of QFIIs, said Xia.

The CSRC statement said that in 2013 it will focus on expanding institutional investors, allowing qualified securities companies, insurance companies and private equities to participate in the wealth management sector.

"We will encourage more long-term overseas investors, including pension funds, welfare funds and sovereign funds into the domestic market," it said.

Guo also highlighted the need to speed up the innovation of futures products by improving research on iron ore and coal futures. A pilot trading market of carbon emission rights is being studied.

This year, the pilot equity transfer program for non-listed small and medium-sized enterprises, or the new over-the-counter market, will continue to expand, to support the growth of the private sector, the CSRC said.

In addition, the commission will put more effort into reforms of the initial public offerings issuance and delisting procedure.

"The regulation on intermediaries, such as the underwriters and accounting companies, will be strengthened," the commission said.