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Cash time for Singapore!
The Singapore stock market is poised to get a welcome boost from a massive influx of billions of dollars from mainland China.
After much debate, China signed a memorandum of understanding with Singapore last week allowing China banks to put their clients’ money in Singapore stocks and funds.
Beijing’s move makes Singapore the third investment destination after its own territory of Hong Kong and Britain to be opened to mainland China banks.
The move will allow Singapore stocks and funds to tap the huge $16 billion pool of funds that Chinese banks can invest in overseas markets under the Qualified Domestic Institutional Investor program.
The scheme gives Chinese banks a quota for investments in overseas markets.
Singapore blue-chip counters and Singapore-listed Chinese firms, called ‘S- shares’, in particular, may attract nouveau riche Chinese investors looking to diversify their portfolios, said some analysts and brokers.
The Monetary Authority of Singapore (MAS) has signed a “supervisory cooperation arrangement” to allow China’s banks to “conduct investments on behalf of their clients with Singapore-based financial institutions”.
The banks will then be able to offer customers a range of investments, such as Singapore equities, fixed-income instruments and funds authorised or recognised by the MAS.
MAS managing director Heng Swee Keat, who signed the memorandum last week, said in a statement: “We look forward to working closely with the CBRC on this initiative and on other areas of cooperation.”
The MAS and the China Banking Regulatory Commission (CBRC) statements did not say when QDII funds can start investing in Singapore.
Still, the news has generated buzz among brokers and Singapore-listed firms.
The CBRC said it will soon sign similar agreements with the United States, Germany and Japan.
This reflects Beijing’s willingness to allow its banks to diversify their investments overseas, following the combined $1.63 billion in losses of four QDII funds offered by fund houses in the fourth quarter last year.
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