China mulls easing foreign stake limits to lure global funds: sources
CHINA is considering relaxing the rules that cap foreign ownership in domestic publicly-traded companies, people familiar with the matter said, as it seeks to lure global funds back to its US$9.4 trillion stock market.
Authorities are pondering policy tweaks to boost overseas ownership in stocks listed in Shanghai, Shenzhen and Beijing as part of a push to open up the market and boost trading, the people said, asking not to be identified as the information is private. China currently caps total foreign ownership in locally-listed companies at 30 per cent, and subjects a single foreign shareholder to a 10 per cent limit.
The latest deliberations on foreign ownership are still in an early stage and details, such as which sectors might benefit and where to set new cap limits, have not been decided, the people said. While the initial take-up may be slow at a time when investors are concerned about the health of China’s economy, a potential relaxation in the near term also comes with a lower risk of a sudden influx of capital stoking market volatility.
The China Securities Regulatory Commission did not respond to a faxed request for comment. The State Administration of Foreign Exchange did not respond to a request for comment.
The discussions come amid an ongoing exodus of foreign funds from the world’s second-largest equity market, with domestic shares ranking among the worst-performing globally this year. It’s another sign that China is following through on a July Politburo meeting pledge to “invigorate capital markets and boost investor confidence”.
Foreign investors dumped a record US$12 billion A-shares last month, and their holdings of China’s equities and debt dropped by about 1.37 trillion yuan (S$256.4 billion), or 17 per cent, from a December 2021 peak through the end of June 2023.
Global investors are fleeing amid a slew of concerns – from China’s fragile economy to the ongoing property crisis and worsening ties with the US. Among its package of measures to soothe investor nerves, Chinese authorities have cut handling fees for stock transactions and stamp duty.
Midea Group, which is seeking a Hong Kong listing, is among the most foreign-owned with an overseas shareholding of 25.8 per cent, as at Thursday (Sep 21), according to exchange data. Centre Testing International Group has the highest foreign ownership at 27.48 per cent, followed by Hongfa Technology at 27.17 per cent, and Proya Cosmetics at 26.37 per cent.
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