1/14/2013
By David Urani

Last week I noted that, based on the first week of 2013 data on equity inflows, investors look hungry for stocks, with inflows into equity funds showing the second largest gain ever, including the largest-ever inflow to emerging market funds. As it turns out, China may be ready to feed that appetite as they look set to raise the amount authorized for foreign investment into stocks.

The China Securities Regulatory Commission says they would like to increase the amount of money allowed to go through the Qualified Foreign Institutional Investor Program (QFII). In other words, foreigners are likely to be allowed to buy more equity in Chinese companies. Currently $80 billion is authorized for foreigners to invest, which accounts for approximately 1.5% of total investment in the stock and bond markets. Details are scarce, although chief regulator Guo Shuqing says they could multiply the amount of investment by 10 times.

This is a great signal to foreign investors that more money may be put to use in the Chinese markets, and it's also a nod to a Chinese government that's becoming more tolerant of foreign "influence" for lack of a better word. The Shanghai Composite was up 3.1% following the news, continuing an impressive run in the Chinese markets over the past month.

David Urani
Wall Street Strategies