Citi-Asia-puts-its-foot-on-the-gas

Asia puts its foot on the gas 5 Strengthening access channels and new products Foreign i nvestor interest remains very high in China, which has the second largest equity and bond markets in the world. The country is also introducing sweeping liberalisation measures (e.g. Stock Connect, China Interbank Bond Market reform, Bond Connect). “Like many markets around the world, China was adversely impacted by COVID-19 but that has not prevented policymakers from pursuing a number of reforms designed to increase foreign investor inflows into domestic equities and bonds,” said Harry Peng, Head of Securities Services for China and Hong Kong at Citi. In June 2020, Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) quotas were abolished by the State Administration of Foreign Exchange (SAFE) making it easier for international investors to trade onshore securities. China’s regulators have also sought to widen global investor participation by reducing the minimum track record and assets under management requirements for QFIIs seeking authorisation. Moreover, the QFII application process has also been dramatically expedited with the China Securities Regulatory Commission confirming that it will now sign off on QFII approvals within 10 working days, instead of 20. China is not the only major Asian economy liberalising its capital markets. Indian regulators have also been working hard to drive inward investment, and these efforts have notably accelerated in recent years. For example, the Securities and Exchange Board of India recently introduced simpler KYC requirements and a more straightforward classification criteria for FPIs. These rule changes have helped a lot in attracting foreign investment into India. A number of Asian markets have also widened the scope of eligible investment products, which foreign investors can trade. In 2019, Taiwan announced the launch of its first ever exchange traded note while investors in China can now engage in securities lending and borrowing. “All of these reforms will help fuel foreign investment,” explained Mishra. On the road to success Asian countries have worked tirelessly to attract foreign investment. This has been achieved through the adoption of industry best practices for post-trade processes. The efforts range from simplifying market access, improving trading and clearing infrastructure, enhancing risk management, introducing new products and adopting fintech. This reform zeal shows no sign of losing its momentum either. With Asian economies expected to recover much quicker than many others from this crisis, the region is likely to attract significant inbound investment. At the same time, many of the barriers across Asian capital markets which hitherto had discouraged foreign investors are being removed. As 2021 progresses, Asian markets are gearing up to roar once again. Driving innovation in Hong Kong and Taiwan The ability to access timely, accurate and consistent information is a major challenge faced by participants in some markets. Typically, this is a result of FMIs performing settlements in batches or if a custodian uses sub-optimal methods of receiving status updates from the market. For instance, the Hong Kong CSD provides settlement status updates directly to its participants’ settlement systems on specific matching/ settlement batch runs. If there is a need to review trade statuses in between the batch runs, operations staff need to manually check the depository terminal. In order to solve this challenge, Citi created a solution which utilises bot technology giving clients real-time processing for matching and settlement in Hong Kong. The solution scrapes the depository terminal continuously for settlement status updates and relays the information into the core securities processing system enabling for near real-time transmission to clients. This gives clients the ability to view their trade statuses consistently throughout the day allowing them to activate stock borrowing in a timely fashion if needed. In Taiwan, Citi helped implement a Host-to-host connection with Taiwan Depository and Clearing Corporation. This facilitated near-real-time trade status and settlement confirmations to clients - enhancing equity settlements, including time-critical SBL and ETF activities.