The Chinese markets rallied, if unconvincingly, this week. It is possible to put this down to a string of announcements in Hong Kong and Beijing which could mean that the worst fears of a concerted Communist clampdown on the Capitalist exuberance are ill founded. To paraphrase Winston Churchill (in 1947), “[capitalism] is the worst form of system, except for all the others”.
The announcement that an A share futures contract will be launched in a couple of months will clearly improve the accessibility of the A share market to overseas investors and is likely to accelerate an increased weighting of A shares in global indices. We have also seen positive noises being made by the China Securities Regulatory Commission (“CSRC”) about this development.
Neither can a recent interview given by Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, be a pure coincidence. In it Mr Yue reiterated the critical role that Hong Kong still plays as an offshore centre in the context of China’s continuing closed capital account. Yue noted that over 60% of foreign equity investments have been made through the Hong Kong Connect system (see our piece at Hong Kong and the new national (in)security law). He went on to comment on the growing Wealth Management initiatives being planned so that HK institutions can team up with local players to offer their services in the Greater Bay Area. As those of you who know us will know, this is an area in which we have been interested for some time now.
Informed sources also disclosed to the Press that the CSRC is formulating a plan to break the impasse with US regulators on the accounting and disclosure standards of Chinese companies with US-listed China ADRs, thus heading off the risk of compulsory delisting.
And lastly there have also been press reports that highlight the concerted effort being made by PRC regulators to resolve the issue about data security which was at the heart of Didi’s less than successful recent debut in New York. We are not holding our breath on this fundamental issue (initial proposals appear to contemplate so called “independent” entities being set up to monitor the use of data – independent from whom one might ask?) but it does seem to show that China is still very hungry for foreign capital flows.
I have a sneaking suspicion that Xi Jinping is a Churchill fan.
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