New | To attract global fund flows, China will need to improve transparency, access to information, says analyst
Global investors prefer policy continuity and open access of information, says stock indexes expert
In uncertain times for China’s economy and markets, transparency advocates say better information flows and reduced capital controls could attract more international investment in equities, promote diversification by Chinese investors and ultimately spur growth.
“The best markets, the most liquid markets, are the ones that have free flow of information, easy access, low transaction costs and good custody systems,” S&P Dow Jones Indices chief executive officer Alex Matturri said.
“To the extent that China’s market becomes more transparent generally, that its rules meet global standards, that will bring more investment into China.”
Domestic and foreign investment schemes like qualified foreign institutional investor (QFII), qualified domestic institutional investor (QDII), renminbi qualified foreign institutional investor (RQFII), mutual fund recognition and the Shanghai-Hong Kong stock connect have facilitated capital flows in and out of China, but Matturri says their limited scope has kept demand high.
“China is such a large part of the global market, as it opens up investors need to find ways to gain access to it,” Matturri said.
At the same time, knee-jerk official reactions to volatility in mainland Chinese equity markets have raised fears among investors that, even if they can get their money into China, they may not be able to get it out again.
“The performance of the last year, when policies were changing weekly, that’s not healthy. Foreign investors are going to take a step back, wait and see, take another look in six months when things have stabilised,” Matturri said.
