Markets rally as authorities announce changes to foreign investment schemes

A-share markets recorded broad-based gains on Friday thanks to more favorable foreign investment policies.

China will scrap quota restrictions on its dollar-denominated qualified foreign institutional investor (QFII) scheme and yuan-denominated RQFII scheme, according to provisions jointly issued by the People's Bank of China and the State Administration of Foreign Exchanges late Thursday.

The move will also simplify outward remittance procedures for QFIIs' securities investment gains and lift other restrictions.

Buoyed by these changes, which take effect on June 6, stock markets opened higher. The benchmark Shanghai Composite Index jumped 0.83 percent to end trading at 2,895.34 points.

The smaller Shenzhen Component Index settled 1.27 percent higher at 11,001.58 points, while the ChiNext Index gained 0.87 percent to finish at 2,125.24 points.

Combined turnover of the two bourses came to 687.4 billion yuan (US$97.1 billion), compared with the previous trading day’s volume of 667.2 billion yuan.

Domestic appliances makers and communications companies were among the top performers. Shares of small kitchen-appliance maker Joyoung Co Ltd rose by 5.44 percent to close at 32.54 yuan per share.

Commenting on the new QFII/RQFII rules, Thomas Fang, head of China Global Markets at UBS, said the relaxation in policy has “been long anticipated” by international investors and will be widely welcomed.

 “The centerpiece of the reform is the integration of the implementation of QFII and renminbi QFII schemes, which allow investors to choose to use either US dollars or yuan when investing in China,” he noted.

Zheng Hong, chief investment adviser at LC Securities, told Caixin that the move will attract more overseas funds to enter the domestic capital market in the medium and long term, optimize the composition of domestic investors and accelerate the internationalization of yuan.