A-shares are shares of mainland China-based companies, which were historically only available for trading by Chinese nationals.
Through local brokers, qualified foreigners will gain access to China’s $6.4 trillion stock market. "Qualified foreigners” refers to foreign nationals working in China who are originally from the 62 countries and regions that have regulatory cooperative agreements with China’s securities authorities. This list includes the US, the UK, Singapore, Australia, Japan and Russia. Previously, only about 30% of the Chinese stock market was available to foreign investors, and traders had to use the Hong Kong connect, Shenzhen or Shanghai for access. The change gives full access to all publicly listed stocks in the mainland to about 1 million foreigners.
REASONING BEHIND THE NEW RULES
Per the China Securities Regulatory Commission website “the move will expand the investor base, introduce more liquidity and improve the structure of the securities market”. The move can also be seen as an effort by regulators to support confidence in the market, given the recent A-share turmoil, as the Shanghai composite index hits its lowest level in 28 months. As explained by Ivan Li, an asset manager with Loyal Wealth Management, “it is a clear message that the country will further open the equity market following a series of liberalizations during the past years.”
Foreign nationals looking to open A-share accounts will need to apply to the CSRC using their passport, an employment certificate issued by a domestic institution, and their employer’s business license or unified social credit code registration certificate. Employees of O&G Capital have successfully opened an account at a major securities firm for trading. Please reach out if you have questions about opening yours.
About the O&G Research Team
The O&G Research Team publishes insights on the global markets. Our research scope ranges from the US to China.
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