Translated by Andrew Vanburen from a Chinese-language piece in Beijing Times
QATAR IS HOPING its subterranean wealth in oil reserves will translate into terrestial returns on the investment front.
To this end, the Gulf nation has applied to significantly boost its sovereign wealth fund investment quota for Chinese A shares to five billion usd from one billion currently.
But will this vote of Mideast confidence boost Far East sentiment?
The Qualified Foreign Institutional Investor (QFII) program was launched last decade to introduce non-Chinese to the world of Chinese A-shares, i.e. those equities that were originally meant for PRC citizens only as compared to their poorer B-share cousins that could be bought by anyone.
Naturally, in traditional Chinese fashion, the policy was implemented and built up piecemeal and gradually over a long period so as to allow all parties to adjust.
It was also meant to keep foreigners at a certain distance from the rapidly expanding Chinese economic juggernaut (much like the construction of the Great Wall).
Qatar, a monarchy on the Arabian Peninsula with a local citizen population of under 300,000, is on the surface the perfect candidate to be clamoring for a bigger QFII investment quota.
The Mideast state has the world's highest per capita GDP and proven reserves of oil and natural gas.
It economy also put China -- of all countries -- to shame last year, growing by a staggering 19.40% -- the fastest expansion worldwide, thanks in large part to rapid increases in both output and export of LNG, oil and petrochemicals.
It has been estimated that Qatar will invest over 120 billion usd in the energy sector over the next decade, both at home and abroad.
And the Muslim state has also attracted around 100 billion usd itself in investment over the years, predominantly into its energy sector.
Therefore, with all that energy money floating around, there is tremendous energy to put it to work in lucrative projects.
Hence, Qatar’s growing interest in China’s capital markets.
But despite the tiny Gulf nation’s energy and enthusiasm for PRC shares, there is little to suggest that this wave of interest from a parched country will elicit a tidal wave of reciprocal attention from other investors and initiate a revival in A-share activity anytime soon.
The China Securities Regulatory Commission (CSRC), the country’s bourse regulator, has been eager to usher more long-term funds into the Shanghai and Shenzhen stock exchanges given the laggard performance of A-shares of late.
However, investors should be wary of putting too much confidence in the possibility of a bull run initiated by the imminent inflow of an additional four billion usd in Qatari money.
After all, with a recent GDP growth rate of nearly 20%, a tiny population and more cash per capita than any other country on earth, any forward-thinking state would do just the same – scour the globe for an underperforming market in which to invest excess funds.
The enhanced interest from 300,000 Qataris in Chinese shares also does nothing to change the fact that the PRC economy is likely to grow at a slower clip going forward, and prospects remain weak in both the EU and North America.
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