Small investors’ direct access to China’s new tech board limited

March 05, 2019 17:31
The China Banking Regulatory Commission last week lowered the subscription threshold for mutual funds to just 10,000 yuan from 1 million yuan. Photo: China News

Chinese authorities are stepping up preparations for the launch of the new tech board in the second quarter of this year, ahead of the nation’s 70th anniversary celebrations.

It appears, however, that the new tech board is not targeting retail investors, at least not directly.

For Chinese individual investors to participate, they need to fulfill two criteria. First, they need to have two years of investment experience in A shares. Second, they need to have a minimum of half a million yuan of assets.

There are 145 million stock accounts at the end of 2018, of which 99.7 percent are individual investors. Only 3 million of these investors meet the two requirements.

That said, it’s worth noting that Chinese authorities have released a set of new rules.

The China Banking Regulatory Commission last week relaxed rules on trust products. For example, the subscription threshold for mutual funds has been reduced to just 10,000 yuan (US$1,491) from 1 million yuan.

The commission also announced that all securities firms, fund management firms, trust companies, finance companies, insurance firms, Qualified Foreign Institutional Investors, and private equity funds will all be able to participate in the new tech board.

These measures suggest that retail investors are encouraged to participate in the tech board through funds.

As for Hong Kong investors, few probably can meet the criteria of two years of experience in A-share investing. Even if they have, it’s unclear whether or not – or when – tech board companies will be included in the stock connect program.

Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, confirmed that he has not started any discussions with mainland authorities on the matter.

That means Hong Kong retail investors most likely cannot access the tech board individually in the short term. But it should be quite easy for them to invest through funds.

This article appeared in the Hong Kong Economic Journal on March 5

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist