China’s plan to buy foreign shares delayed

China’s plan to allow individual investors to buy overseas securities for the first time has not materialised yet because detailed rules are still being drafted, the country’s main stock regulator said on Thursday.

“We will continue to improve the detailed regulations,” Shang Fulin, chairman of the China Securities Regulatory Commission said at the World Economic Forum in Dalian. “This trial will be very good for the international balance of payments. But in the initial stage I believe the numbers will not be so big and the impact on the [Chinese domestic] A-share market won’t be significant.”

The scheme was announced last month by the country’s foreign exchange regulator and will allow individual investors to trade Hong Kong-listed stocks by opening accounts at Bank of China’s Tianjin branch. In practice, investors will be able to open Tianjin accounts at any BOC outlet.

The government wants citizens to buy more foreign currency to reduce the country’s ballooning foreign exchange reserves, reduce excessive domestic liquidity and relieve appreciation pressure on the renminbi.

Jiang Jianqing, chairman of Industrial and Commercial Bank of China, the world’s largest bank by market capitalisation, told the Financial Times his bank was preparing to offer Hong Kong stock trading services as well. “This will present a huge business opportunity for us,” Mr Jiang said in an interview on Thursday.

Officials in Binhai said the initial plan was to allow investors with a minimum of Rmb100,000 ($13.268) to open trading accounts but the CSRC has yet to announce any details. Speculation is rife that the limit will be raised to discourage massive outflows from the mainland.

China’s benchmark index has risen more than five-fold in over two years and mainland-traded stocks are far more expensive than their Hong Kong counterparts, measured by price to earnings ratios or comparing share prices in the 45 companies listed in both markets.

Since the plan was announced Hong Kong stocks have soared in anticipation of a flood of Chinese money. Mr Shang denied the regulator had introduced a secret policy of encouraging all but the largest domestic companies to list on the Shanghai or Shenzhen stock exchanges, although regulatory and market sources have confirmed it exists.

He said the government would soon allow foreign securities firms to start investing again in the Chinese securities sector, following a year-long ban.

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