China Widens Market Access For Funds: 2 Funds To Buy

Beginning July 1st, China and Hong Kong will have cross-border sales of funds. Investors took the view that cross-border sales of mutual funds will increase inflow of equity. In a joint statement, China and Hong Kong regulators said the initial quota would be $97 billion, which is to be equally split between both. This decision will improve access to capital as well as financial markets.

“Mutual recognition would enable Chinese asset-management firms to sell their products to offshore investors, while giving their foreign counterparts direct access to the Chinese market. International managers previously tapped China’s growing personal wealth by teaming up with local companies for mutual-fund joint ventures in the country,” reported Bloomberg.

This is one of China’s latest series of efforts to bolster the economy. China’s benchmarks soared in 2014 and have maintained the winning momentum in 2015. The CSI 300 increased 3% last Monday, moving above the 5,000 mark for the first time since 2008.

Also, Chinese stocks enjoyed strong gains as China’s policymakers declared the guidelines for reform priorities in 2015. Beijing is now keen to open up the country's capital markets.

Deepening Reform Plans for Crucial 2015

The reform guidelines were drafted by the National Development and Reform Commission. The State Council, the country’s cabinet, approved the guidelines, which calls 2015 “a crucial year for deepening reform”.

The statement noted: “More focus will be placed on promoting financial reforms to push forward the development of the real economy”. This highlights the capital market reforms that China has been serious about since last year. China’s reforms now range from streamlining administrative processes to focusing on the importance of boosting the yuan's role globally. The reforms look to further open up the financial sector to domestic and foreign investors.

The reforms highlight the Shenzhen-Hong Kong stock connect. In Nov 2014, trading link between Hong Kong and Shanghai was approved. The so-called Shanghai-Hong Kong Stock Connect program allowed retail investors around the globe to invest in mainland Chinese equities for the first time. It will likely result in more capital inflows into the country and certainly lift its dwindling economy.

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