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Sunday 5 July 2020

SEBI probing Chinese investment in Indian stock markets

SEBI, which had so far not probed China, must factor in the Chinese ploy of buying less than 1% stakes of Indian companies to avoid tracking

The Securities and Exchange Board of India (SEBI) has issued orders to custodians to get information about Chinese money in the Indian stock markets. SEBI wants to know how much investment has been done in or from China on the Bombay Stock Exchange.

SEBI can ask for information about the portfolio of any investor and such decisions are made from time to time, but this is the first time that the government has asked for clear information about the investment coming from a particular country.

Under government instruction, SEBI is investigating the investments coming from China and Hong Kong.

Last week meanwhile, the People’s Bank of China (PBOC) increased its share in HDFC BANK. The Chinese bank, which had a 0.8% stake in HDFC, has now acquired more than 1% stake. This purchase in the open market has upset the stock market experts.

Buying stakes from under open market operations through the FPI route is very sensitive in terms of an acquisition. At a time when the stock exchange is barely active due to the lockdown to check the spread of coronavirus, making shares of important companies quite cheap, SEBI will let the government know if China is taking undue advantage of the slump.

16 Chinese FPIs registered, SEBI told

In its order sent to the custodians, SEBI wrote, “… Urgently provide (a) list of FPIs whose beneficial owner is from China and list of FPIs whose beneficial owner is from Hong Kong…”

Asset managers say that tracking investments from China and Japan is an extremely complicated task. These countries, they say, either invest in bits and pieces and, if they make big investments, they do not do it through Indian asset managers.

“Most of the asset managers do not court investments from these countries as they are very difficult to convince or to break through. So investments from either China or Japan is small or not brokered by Indian asset managers,” an asset manager said on the condition of anonymity.

So far, 16 Chinese FPIs have been registered in the market and investors have put in about $ 11 billion through them. These FPIs include PBOC, CIFM Asia Pacific Fund, China International Fund Management, Best Investment Corporation and Asian Infrastructure Investment.

In nine companies, the Chinese bank has a little above 1% of the stakes each, which is the limit beyond which tracking begins.

SEBI and depositories disclose only the top 10 jurisdictions that invest in India. China is not one of them.

China is infamous also for extending loans to companies in different countries — including PSUs like a port of Sri Lanka in 2018 — on terms that the recipients find difficult to meet and then buying out those firms.

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