Mainland investors still can't buy H shares
( 2001-06-04 23:43 ) (9 )

The mainland authorities are unlikely to allow their citizens to invest in H shares of mainland companies listed in Hong Kong in the near term, analysts said.

"It involves the foreign exchange control scheme in which renminbi is still not freely convertible under the capital account,'' said an official with the China Securities Regulatory Commission (CSRC) Monday.

The restrictions are unlikely to be lifted in the near term, so H share opening is also impossible, said the official, who declined to be named.

Several Hong Kong officials were reported as saying recently that they would suggest to the mainland authorities that they give mainland investors the go-ahead to trade H shares.

Such investors were permitted to trade the formerly foreign-only B shares in February.

"We've heard of the suggestion, but CSRC is unlikely to take it up in the near term because the time is still not ripe,'' the CSRC official said.

Analysts said foreign exchange control still forbids a free outflow and inflow of hard-currency capital, meaning a big hurdle for H share opening to mainland investors.

However, reports said some of the investors have already dipped into the H share market through illegal channels.

For example, they ask for help from their overseas relatives or use passports to open accounts in Hong Kong or abroad, thereby taking advantage of legal loopholes.

Some gained access by participating in tourist groups to Hong Kong, lured by the low prices of many H shares compared with domestic A shares.

In spite of all this, the central government will continue to stay firm, the CSRC official said.

Regarding the liberalization of renminbi, it will take years to complete, analysts said.

But it will happen.

"China's economic fundamentals and foreign exchange reserves are still not sound enough to shoulder the impact of the liberalization,'' said Xie Taifeng, general manager of the Development and Research Centre of the Beijing Securities.

However, as conditions improve, renminbi should be finally made fully convertible and H share opening would be realized then, said Xie.

It is all part of the opening-up of the mainland's capital market and the globalization of the economy.

The mainland authorities have delivered positive hints over the issue but have never given a timetable.

A report by the French securities firm Credit Lyonnais Securities has predicted that mainland investors will be allowed into the H share market in three to five years.