Stock connect gaining favor among overseas investors: survey

Overseas investors are showing more interest in China's capital market despite volatilities some say had kept investors on the sidelines, a survey by Standard Chartered found.

The survey, published by the Asia-focused lender this week, shows that 67 percent of the 900 investors it interviewed will consider increasing their investment in China and 62 percent are confident that the investment condition will improve within a year.

The survey was conducted between March and April this year among nearly 900 global investors, whose mostly optimistic view on the investment opportunities in China's capital markets contrasted with volatility at the time, the bank said.

In terms of the channels, 62 percent of investors said they use the Qualified Foreign Institutional Investor (QFII) program to invest in China, another 31 percent invest through a similar program RQFII using renminbi raised offshore, and 52 percent said they are also using the Shanghai-Hong Kong Stock Connect to invest in Shanghai-listed shares.

On Tuesday, China also granted a 250 billion yuan (38 billion U.S. dollars) RQFII quota to the United States, a vice governor of the central bank said during the China-U.S. Strategic and Economic Dialogues.

The survey also shows that the stock connect is gaining more favor among investors as nearly 70 percent say they will consider investing through this channel in the future, compared with 40 percent for RQFII and 36 percent for QFII.

Another stock connect program linking China's stock market in Shenzhen with Hong Kong is expected to open sometime this year, further broadening investors' access to China's capital markets.

In addition to stocks, 33 percent of investors expressed interest in China's interbank bond market after regulators broadened access for institutional investors.

Next week, global index compiler MSCI will announce whether it will include China's yuan-denominated A-shares following reviews and consultations with its clients.

Adding shares listed on China's stock markets in Shanghai and Shenzhen to MSCI's widely tracked global benchmarks will attract more overseas investors to allocate capital to China.

Analysts are upbeat that A-shares have a better chance of being included this time than previously, as regulators in China have addressed some of the major concerns raised by investors.

Last month, China's two stock exchanges in Shanghai and Shenzhen published detailed rules on trading suspension, setting time limits for listed companies to suspend trading of their shares for matters such as asset restructuring.

This, along with the stock regulator's clarification on foreign investors' beneficiary ownership, prompted Goldman Sachs to raise the probability of inclusion from 50 percent to 70.

(APD)