China Lets Expats Trade Stocks, But They're in No Mood to Buy

(Bloomberg) -- Amado Trejo, a business consultant from Mexico who’s worked in Shanghai for a decade, says he’s in no rush to buy Chinese stocks once a ban on trading by expatriates ends this week.

“Everything begins as an experiment in China -- there will be mistakes,” the 36-year-old said, explaining that he’ll wait for regulators and brokerages to iron out any kinks before jumping into one of the world’s most-volatile markets.

Starting Saturday, most foreigners living in China will be allowed to open local brokerage accounts for trading yuan-denominated A-shares. Expats interviewed by Bloomberg News are taking a wait-and-see approach, echoing the gloomy mood among Chinese investors who’ve pushed the nation’s $5.7 trillion stock market to within a hair’s breadth of its low during an epic crash almost three years ago.

While it’s largely a symbolic gesture, lifting the ban on expat traders is part of China’s push to integrate local financial markets with the rest of the world. In the last few years, new trading links with Hong Kong have given foreigners unprecedented access to Chinese shares, and regulators may open a connection with London later this year. Expats will gain access to hundreds of smaller companies tied to China’s growing consumer and technology sectors -- many of which lack overseas listings and are inaccessible through the exchange links.

The government has been opening to expat investors in steps. Permanent residents and foreign employees of domestically listed companies who live in China have had access to brokerage accounts for years. The changes going into effect on Saturday will expand that right to residents from 62 countries or territories that have cooperation agreements with China, including Hong Kong, the U.S., Britain, Singapore, Australia and Japan.

"It’s a symbol of opening up and connecting with international markets more than anything else,” said Zhu Zhenxin, director of research at Reality Institute of Finance in Beijing. "In terms of fund inflows, the impact will be next to nothing.”

There were about 900,000 expats working in China as of 2016, according to the official Xinhua News Agency. That compares with the more than 140 million Chinese nationals who have brokerage accounts and make up more than 80 percent of trading on domestic exchanges.

Greg Van den Berg, a Belgian who owns a fintech startup in Beijing, says he’s interested in trading Chinese stocks but wonders whether brokerages will offer English-language help or trading apps.

Marketing Blitz

“Adding Chinese stocks will diversify my portfolio and I would likely do so, but it depends on the hassle of opening an account," he said.

Several local firms are taking steps to make the process easier. GF Securities Co. and Everbright Securities Co. said they’re training workers and upgrading software to help expats open accounts. Sinolink Securities Co. said staff at its brokerage outlets will help non-Chinese speakers fill out forms and learn trading rules. Soochow Securities said it’s planning a marketing blitz, targeting expat business owners and foreign shareholders of Chinese-linked firms though the local association of listed companies in its home city of Suzhou.

"There may be a wait-and-see period,” Shanghai-based Sinolink Securities Co. said in an emailed response to questions from Bloomberg News. “But with increased media exposure and as brokerages perfect the procedures for opening up an account, the number of expat investors may increase."

China’s securities watchdog has cracked down recently on insider trading and market manipulation to boost investor confidence and transparency, but it’s not enough for Elliot Zaagman, an American who’s worked for eight years in Beijing as an executive coach. He says the world’s largest emerging market is still too wild for his taste.

"Even Chinese investors say it’s a rigged system," Zaagman said. "I’m not putting my money in, that’s for sure.”

--With assistance from Lucille Liu.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net;Ken Wang in Beijing at ywang1690@bloomberg.net;Weiyi Qiu in Beijing at wqiu26@bloomberg.net

To contact the editors responsible for this story: Will Davies at wdavies13@bloomberg.net, Jason Clenfield, Michael Patterson

©2018 Bloomberg L.P.

With assistance from Editorial Board