Walter Hutchens’ Blog

The CSRC has announced here that they have approved JP Morgan Chase’s application for QFII status. This brings the total number of CSRC approvals for QFIIs to nine. The roster is:

UBS
Nomura
Citigroup
Morgan Stanley
Goldman Sachs
Deutsche Bank
HSBC
ING
JP Morgan Chase

SAFE approves the investment quota (the amount each firm may invest) separately, and JP Morgan will still have to go through that.

According to a story last week in the Financial Times, SAFE is becoming stingy with these quotas, perhaps wanting to keep these firms from making big bets that the RMB will be revalued, giving them instant portfolio appreciation.

It is sometimes said in China that the PRC stock markets are “policy markets” (zhengce shichang), not “market markets.” Ironic, though unsurprising, if foreign investors, are replicating on a big scale what PRC investors do. Foreign capital was supposed to help the markets move away from speculative trading, but given the same environment, why would foreign capital behave differently than domestic capital? PRC investors don’t speculate because they have a genetic or even historical disposition to do so; they speculate or “invest” on policy because that is what often moves the markets, not fundamentals that would be quite hard to ascertain anyway given reportedly low quality of most disclosed information.

Incidentally, Carl Walter, co-author of one of the best books on PRC stock markets, is with JP Morgan in Beijing now.