China has granted a flurry of approvals to foreign institutions to invest in equities as it steps up its attempt to lure more cash into its beleaguered stock markets.
Coupled with a state media report that local pension funds will start investing in shares, the moves were the latest indication of how authorities are trying to inject confidence in markets that have been among the worst performing in the world for two years.
The promise of policy support and stronger than expected economic growth data combined to fuel a rally yesterday. The Shanghai Composite index closed up 4.2 per cent, its biggest single-day jump in more than two years.
“Ultimately, I think shares had fallen too much. On that basis, everyone has been becoming more confident that there will be policies to stabilise the market,” said Sun Jianbo, chief strategist for China Galaxy Securities, a domestic brokerage.
The Shanghai Composite tumbled 22 per cent last year and it has been the worst performer of the world’s 10 biggest stock markets in the past two years, despite China’s continued economic boom.
The securities regulator announced late on Monday that it had awarded quotas to 14 foreign institutions in December to invest in domestic capital markets. Chinese markets are mostly off limits to foreigners and quotas granted under the Qualified Foreign Institutional Investor programme are the main way in the door. But they are very restrictive, typically capped at about $100m.
The securities regulator adjusts the pace of approvals in an attempt to influence the stock market’s direction. From May until October last year, when China worried that hot-money inflows were causing inflation, it granted no such quotas.
But recently, as evidence has mounted of capital outflows and stock prices have tumbled, Beijing has started awarding quotas again.
December was the busiest month for approvals since China launched the foreign investor programme in 2003, bringing the total number of quotas to 135. The newest recipients include the central banks of Korea and Thailand, the Kuwait Investment Authority and the Canadian Pension Plan.
In what would be an even bigger boost for Chinese stocks, the China Securities Journal, an official newspaper, reported yesterday that regulators would allow local pension funds to invest about Rmb100bn ($15.8bn) in capital markets. China’s national pension fund invests about a third of its assets in stocks, but local pension funds – managed by provinces and cities – put very little of their money into equities.
Guo Shuqing, recently appointed head of the China Securities Regulatory Commission, vowed last month to bring more pension money into equities to help stabilise markets that are still dominated by small-sized retail investors.
“归根结底，我认为股市跌过头了。有鉴于此，大家越来越有信心认为，将会出台多项政策来稳定市场，”中国银河证券(China Galaxy Securities)首席策略师孙建波表示。
去年12月是中国自2003年启动境外投资者计划以来审批最为忙碌的月份，合格境外机构投资者的总数也因此达到135家。新获得资格的机构包括韩国央行和泰国央行、科威特投资局(Kuwait Investment Authority)以及加拿大养老金计划投资委员会(Canadian Pension Plan Investment Board)。
将给中国股市带来更大提振的动态是，据官方的《中国证券报》(China Securities Journal)昨日报道，监管部门将允许地方养老基金向资本市场投资大约1000亿元人民币（合158亿美元）。中国的全国社保基金将大约三分之一资产投入股市，但由各省市管理的地方养老基金目前极少投资股市。