Citibank aids 1st margin financing, securities borrowing under QFII

Citibank (China) Co Ltd announced on Tuesday that it has successfully facilitated some of the first margin financing and securities borrowing transactions in China for global investors under the Qualified Foreign Institutional Investors plan.

Tuesday marks the first time that global investors can conduct such transactions in China's A-share market, following the new Qualified Foreign Institutional Investors (QFII) regulations that took effect on Nov 1.

The new QFII regulations made major amendments to the previous regime, including unifying QFII and Renminbi Qualified Foreign Institutional Investors (RQFII) plans and expanding permissible investment scope, as well as offering a more convenient and flexible framework for foreign investors to participate in China's capital markets.

Margin financing and securities borrowing, together with securities lending enabled last month, will significantly expand the variety of financial instruments available to QFII investors and provide new ways for them to participate in China's A-share market, experts said.

"These new instruments could help global investors achieve more flexible and diversified investment strategies, potentially increasing the return and providing an alternative to hedge market risk," said Vicky Tsai, Citi's China head of securities services.

Bryan Murphy, global head of intermediaries client coverage at Citi's securities services, also commented.

"We have seen a significant new wave of QFII applicants in recent months. Global investors are looking to take advantage of the new financial instruments available to them, expand their network inside China and reduce counter-party and concentration risk," he said.

UBS AG also announced on Tuesday it executed several securities' borrowing and subsequent short-sell transactions through its QFII account on the first day of market trading.

"Demand from global investors for China A-share investments continues to grow at a very fast pace. Allowing institutional investors to access the onshore securities lending and borrowing market, thus facilitating low net investment strategies, is a major development and will support the growth and diversification of investment strategies," said Tim Wannenmacher, head of Asia-Pacific financing and co-head of distribution at UBS.

"Following the launch of Shanghai/Shenzhen-Hong Kong Stock Connect and the inclusion of A-shares in three major international indices, this latest relaxation of QFII rules will further boost the inflow of foreign capital. It is important because foreign participation in China's onshore securities' lending and borrowing market enhances the 'price-discovery' function of the stock markets," said Tommie Fang, head of China global markets and QFII representative at UBS.