Margin financing and securities borrowing, together with securities lending enabled last month, widens the variety of financial instruments available to QFII investors and provides new ways for them to play in the China A-share market. 

Citibank (China) Co, part of Citigroup, this week said that its direct custody and clearing business has processed some of the first margin financing and securities borrowing transactions in China for foreign investors under the Qualified Foreign Institutional Investors scheme. The investment regime, introduced in November last year, is part of China's strategy for attracting overseas capital.

The transactions mark the first time in QFII’s history when global investors can conduct such operations in the China A-share market, Citigroup said. New QFII regulations took effect on 1 November 2020.

Margin financing and securities borrowing, together with securities lending enabled last month, widen the variety of financial instruments available to QFII investors and provides new ways for them to play in the China A-share market. 

The new QFII regulations changed the previous regime by sweeping various programmes under one roof, increasing the scope of investment, and streamlining application and review procedures.

“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,” Vicky Tsai, Citi’s China head of securities services, said. 

“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 counterparty and concentration risk,” Bryan Murphy, global head of intermediaries client coverage at Citi’s Securities Services, said.