What Is a Foreign Portfolio Investment?

Foreign-related securities investment refers to the purchase of securities issued by Chinese governments or enterprises (including overseas enterprises controlled by domestic capital holdings) by overseas natural persons, legal persons and other organizations through domestic or overseas securities markets. Overseas securities markets, purchases of securities issued by foreign governments or overseas enterprises.

Foreign-related securities investment

Right!

Foreign-related securities investment refers to the purchase of securities issued by Chinese governments or enterprises (including overseas enterprises controlled by domestic capital holdings) by overseas natural persons, legal persons and other organizations through domestic or overseas securities markets. Overseas securities markets, purchases of securities issued by foreign governments or overseas enterprises.

Chinese name

Foreign-related securities investment

Foreign name

Foreign investment securities

Complex

Foreign-related securities investment

Classification

Class 3

(1) Domestic subject securities investment and overseas subject securities investment "1 This is a division based on the investment subject. Among them, domestic subject securities investment is equivalent to the aforementioned" foreign securities investment "; overseas subject securities investment is equivalent to the aforementioned" foreign investment " Securities investment. " ^[1]

1. Domestic investors 'investment in overseas securities Domestic investors' investment in overseas securities may also be referred to as "foreign securities investment" in the statistics of the State Administration of Foreign Exchange, which means that Chinese legal persons and other organizations purchase foreign securities through overseas securities markets Behavior of securities issued by governments or foreign companies. The main body of investment here is China's legal persons and other organizations, the place of investment is the overseas securities market, and the object of investment is the securities issued by foreign governments or overseas enterprises. The so-called "foreign enterprise" means that there is no domestic capital holding in the foreign enterprise, that is, it does not include the red-chip companies that will be discussed in this chapter. In this investment process, capital flow is the outflow of domestic capital to overseas. At present, the main bodies of foreign securities investment are mainly Chinese enterprises and financial institutions, such as securities companies, insurance companies, and banks. However, according to media reports, the Chinese government is considering allowing domestic natural persons to make overseas investments. In many signs, this is an inevitable trend. The newly revised Foreign Trade Law of 2004 has expanded the main body of foreign trade rights to natural persons. Foreign securities investment will also be aligned with foreign trade in the near future, allowing domestic natural persons to invest in foreign securities. The most important system in foreign securities investment is the QDII system, which is the abbreviation of Qualified Domestic Institutional Investors in English. The Chinese language is called the Domestic Institutional Investors' Overseas Investment Qualification Recognition System, which specifically refers to domestic institutions approved by the Chinese government to invest in foreign capital markets with foreign exchange. This means investing in the Hong Kong capital market. Since QDII has assumed more of a political role to alleviate the pressure of RMB appreciation, QDII is opening faster. The accelerated development of QDII clearly conveys a signal: The Chinese government actively encourages capital exports. The launch of QDII is conducive to perfecting the RMB exchange rate formation mechanism and to alleviating the pressure on China's foreign exchange reserve growth. It is an important way to promote the circulation of domestic and foreign currency markets without the full opening of China's capital account. According to the latest information disclosed by the State Administration of Foreign Exchange, the Chinese government will expand the scope of securities companies' foreign securities investment, reduce foreign exchange controls, and encourage large domestic enterprises to invest overseas through mergers and acquisitions. QDII projects will be expanded and insurance companies will be allowed. Invest in more overseas financial products. The main purpose of encouraging foreign securities investment in China is to ease the pressure of RMB appreciation, but the price paid is huge. According to the statistics of the State Administration of Foreign Exchange in October 2006, China s securities investment experienced a significant deficit in the first half of 2006. In the first half of the year, domestic institutions investment in overseas securities increased significantly, and net outflows increased from US $ 8.5 billion in the same period in 2005 to 2006. In the first half of the year, it was US $ 44.8 billion, which drove a significant deficit of US $ 29.2 billion in securities investment projects, compared with a deficit of US $ ¹ billion in the same period in 2005. ^[1]

1. The investment entity shall have the corresponding qualifications. First, the nature of investment entities is subject to corresponding restrictions in laws and regulations. For example, the main body of China's foreign securities investment can only be a legal person or other organization, and natural persons are excluded. Secondly, the main body of investment that has been permitted by laws and regulations also has other corresponding qualifications, otherwise it will not be possible to invest in certain types of securities. For example, in China's QFII system, if foreign institutional investors want to invest in domestic stocks and bonds, they must be financially sound, have good credit standing, meet the asset scale stipulated by the China Securities Regulatory Commission, and meet the requirements of the China Securities Regulatory Commission. . ^[1]

2. The types of securities invested have limitations. As mentioned earlier, the "foreign-related securities investment" stipulated in the "Implementation Rules and Regulations on the Balance of Payments Statistics and Declaration" is still a concept parallel to "foreign-related futures, options investment" and "foreign-fund investment". The main types of securities involved in "foreign-related securities investment" are stocks and bonds.

3 Investment behavior involves issues related to international economic law, such as the protection of the host country of the investment target. In foreign-related securities investment, the target of investment is often excellent domestic enterprises, industry leaders, or large state-owned enterprises, which are related to the country's economic lifeline, which inevitably involves issues such as antitrust and endangering the national economic security. When a foreign investor purchases shares of a domestic target company strategically and on a large scale. Therefore, China's laws and regulations will protect the investment object to a certain extent and strictly review the process of overseas securities investment.

4 Investment risks and investment returns have more uncertainty. The uncertainty of risk and return can also be said to be a symmetric ratio of risk and return, that is, the purchase of securities will make the investment risk that investors bear during the holding period of the securities and the investment income obtained often correspond. The higher the investment income may be, and vice versa. This feature is also a common problem faced by all securities investments. However, due to the "foreign" factors of foreign-related securities investments, the risks and returns of investments will also be linked to fluctuations in international capital markets and exchange rate changes. As prominent.