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CAPITAL MARKETS

Chinese equities: Foreign retail investors cross the final frontier to the A-share market

New fund gives access to 1,353 listed companies on Shanghai and Shenzhen’s markets, compared with 118 H-share stocks and 88 red chips.

By Chris Wright

It’s the final frontier of Chinese investment. Foreign retail investors can now buy a managed fund that gives them access to China’s A-share market: the stocks previously only open to mainland nationals and a handful of tightly regulated foreign institutions.

JF Asset Management, part of JPMorgan, launched the JF China Pioneer A-Share Fund on June 19 for investors in Hong Kong, making it the first A-share fund to be authorized by Hong Kong’s Securities and Futures Commission.

The manager is doing so through the $150 million investment quota it received as a qualified foreign institutional investor (QFII), which refers to overseas banks and fund managers approved by the China Securities Regulatory Commission to put foreign capital into Chinese markets under a scheme enacted in December 2002.

A-shares have a lot going for them on paper but demand an adventurous spirit from investors. Investors have by and large become comfortable with Chinese stocks but only H shares and red chips – those that are listed in Hong Kong – have had to go through the public scrutiny inherent in a Hong Kong IPO, and continue to have to meet SFC standards on disclosure and corporate governance.

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