China may become one of the biggest securities lending markets, says PASLA
10 February 2021 China
Image: toa555/adobe.stock.com
As the world鈥檚 second-largest securities market opens, China could become one of the largest securities lending markets in the world following the Qualified Foreign Institutional Investor (QFII) rule changes, according to the Pan Asia Securities Lending Association (PASLA).
China amended its QFII scheme late last year to allow foreign investors to lend and borrow securities directly in the mainland market. Following a flurry of transactions, PASLA and international custodians now forecast that China鈥檚 equity and fixed income markets could knock the US off the top spot.
PASLA鈥檚 chair Stuart Jones states: 鈥淕iven the scale of the market and the pace of progress, it would be reasonable to expect that China will become one of the biggest securities lending markets globally.鈥�
Jones notes that it is unclear how long this will take and whether last year鈥檚 reforms will make possible a vibrant securities lending market for foreign participants within the next five years.
International custodians, including HSBC, Deutsche Bank, and Standard Chartered have also welcomed the liberalisation of the QFII scheme and were quick to facilitate the first domestic securities lending transactions on the day the rules changed late last year.
Standard Chartered鈥檚 executive director, sales, China Access, financing and securities services, Susan Yu, says the move is 鈥渁 remarkable step forward opening up the domestic securities lending and borrowing market to global participants鈥�.
Meanwhile, Deutsche Bank expects China鈥檚 markets to continue growing, corresponding to the country鈥檚 economy.
Tony Chao, head of securities services Greater China and head of securities services sales in North Asia at Deutsche Bank, says China will soon become 鈥渢oo big to ignore鈥� for global investors, not only in terms of portfolio allocation and risk diversification but also for absolute returns.
A common opinion voiced by international banks active in China is that domestic assets can add diversification to global investors. Standard Chartered, Yu, explains that global investors can 鈥渆njoy the dividends brought by qualitative economic growth鈥�.
However, he adds, global investors, must adapt to differing rules in China, similar to the rest of Asia Pacific. PASLA鈥檚 Jones explains that over time 鈥淐hina has become a very investible and accessible market and is engaged with the full spectrum of portfolio risk management products and the importance of different investor types to the ecosystem鈥�.
鈥淓mbracing and understanding these factors is important to all global investors as they look to increase their exposure to such a large market,鈥� he states. 鈥淎ny evolution takes time and today鈥檚 reformed QFII scheme is a result of an ongoing dialogue and engagement by a regulator that is both forward-looking and collaborative.鈥�
Now read: 鈥楾he sleeping giant stirs鈥� in full from the latest issue of Securities 麻豆影视传媒 Times.
China amended its QFII scheme late last year to allow foreign investors to lend and borrow securities directly in the mainland market. Following a flurry of transactions, PASLA and international custodians now forecast that China鈥檚 equity and fixed income markets could knock the US off the top spot.
PASLA鈥檚 chair Stuart Jones states: 鈥淕iven the scale of the market and the pace of progress, it would be reasonable to expect that China will become one of the biggest securities lending markets globally.鈥�
Jones notes that it is unclear how long this will take and whether last year鈥檚 reforms will make possible a vibrant securities lending market for foreign participants within the next five years.
International custodians, including HSBC, Deutsche Bank, and Standard Chartered have also welcomed the liberalisation of the QFII scheme and were quick to facilitate the first domestic securities lending transactions on the day the rules changed late last year.
Standard Chartered鈥檚 executive director, sales, China Access, financing and securities services, Susan Yu, says the move is 鈥渁 remarkable step forward opening up the domestic securities lending and borrowing market to global participants鈥�.
Meanwhile, Deutsche Bank expects China鈥檚 markets to continue growing, corresponding to the country鈥檚 economy.
Tony Chao, head of securities services Greater China and head of securities services sales in North Asia at Deutsche Bank, says China will soon become 鈥渢oo big to ignore鈥� for global investors, not only in terms of portfolio allocation and risk diversification but also for absolute returns.
A common opinion voiced by international banks active in China is that domestic assets can add diversification to global investors. Standard Chartered, Yu, explains that global investors can 鈥渆njoy the dividends brought by qualitative economic growth鈥�.
However, he adds, global investors, must adapt to differing rules in China, similar to the rest of Asia Pacific. PASLA鈥檚 Jones explains that over time 鈥淐hina has become a very investible and accessible market and is engaged with the full spectrum of portfolio risk management products and the importance of different investor types to the ecosystem鈥�.
鈥淓mbracing and understanding these factors is important to all global investors as they look to increase their exposure to such a large market,鈥� he states. 鈥淎ny evolution takes time and today鈥檚 reformed QFII scheme is a result of an ongoing dialogue and engagement by a regulator that is both forward-looking and collaborative.鈥�
Now read: 鈥楾he sleeping giant stirs鈥� in full from the latest issue of Securities 麻豆影视传媒 Times.
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