China Focus: Investing abroad expected to gain popularity

Putting money overseas will become more popular among individual Chinese investors as options for outbound capital diversify, Chinese fund managers say.

China is considering adding another cross-border program and more mutual fund recognition schemes that allow Hong Kong asset managers to sell overseas funds directly to mainland investors.

In April, for the first time since the launch of Shanghai-Hong Kong Stock Connect in late 2014, Chinese investors used the entire 10.5 billion yuan (1.7 billion U.S. dollars) daily quota for the program.

According to a report by Bain & Company and China Merchants Bank, China's overall individual investable assets totaled 112 trillion yuan by the end of 2014.

The Chinese stock market turmoil in August, along with the rapid growth of private wealth and scarcity of domestic investment options, pushed more Chinese investors to shift towards global capital markets.

"Chinese enthusiasm for cross-border investment will keep rising," said Hou Mingfu, deputy general manager at China International Fund Management.

Chinese investors will have to cope with lasting tepid economic growth, low interest rates and a volatile capital market in the future, Hou warned.

Zhang Shuolin, general Manager at China International Fund Management, said overseas investment would become a significant proportion of Chinese investors' portfolios.

As China has been stepping up efforts to make the yuan more accessible in global markets, overseas investment options have evolved into a conglomerate of Shanghai-Hong Kong stock connect, the Qualified Domestic Institutional Investor scheme, mutual fund recognition schemes and the Qualified Domestic Limited Partner scheme.

The Hong Kong and Shenzhen stock market connect plan, currently pending approval from regulators, will be launched in the coming months.

Hou advised domestic investors to focus on mature foreign markets while keeping an eye on emerging markets. The low-priced Hong Kong shares and China's dollar debts are two of the most accessible options for Chinese.

But fund managers also warn that Chinese investors should be aware of foreign markets' risks in their attempts to diversify portfolios.

Xu Changtai, Chief Asian Market Strategist at J.P. Morgan Asset Management, said investor-bothering issues including Greece's debt crisis, the anticipated U.S. interest rate lift and the global impact of China's economic slowdown would not go away in 2016.

"Despite the affluent liquidity flow in the financial system, investors' anxiety, the opaque nature of policies and excessive valuation of certain asset categories might increase market vicissitudes," said Xu, advising diversification in the challenging global investment environment. Endi