The diversity of Chinese equity portfolios is to increase when the number of companies accessible to foreign investors doubles at the end of 2014.
The China Securities Regulatory Commission and the Securities and Futures Commission is to allow international investors access to companies listed on the Shanghai stock exchange, where previously they were limited to those listed in Hong Kong.
Michael Chiu, an investment director for Chinese equities at HSBC Asset Management, said the change, which is due in October, would raise the number of Chinese stocks to 2500 companies and allow smarter construction of active portfolios.
Quotas will apply to the amount of shares that can be purchased of RMB300 billion (US$50bn) in one year and RMB13 billion a day, but Chiu foresaw these limits being raised gradually.
The changes also give mainland Chinese investors greater access to shares listed in Hong Kong which are open to foreign investors.
John Pearce, chief investment officer, UniSuper Management described the move as “logical and incremental step in the ongoing liberalisation of Chinese capital markets”.
David Vella, portfolio manager growth assets at First State Super, saw the change as being mainly of benefit for fund managers.
The changes come as part of a move to reform the Chinese economy through a clamp down on corruption and in shifting more power in how resources are allocated to the free market.