Sebi seeks details of all Chinese investments in stock markets

Mumbai: The Securities and Exchange Board of India (Sebi) has issued fresh communication to custodians seeking details of investments coming from China or via China into Indian stock markets.

Currently, custodians have to do periodic reporting of ultimate beneficiary of a foreign portfolio investor (FPI) or when Sebi asks for it. But a specific request for details of investments by Chinese FPIs or where a Chinese investor is a beneficiary is extremely rare.

This communication, seen by Mint, comes after government clarified that the regulator should increase its scrutiny of investments coming from China and Hong Kong. Mint had reported on 14 April that Sebi was awaiting clarity from the government on how to look at Chinese investments.

While Sebi's initial intent was to increase scrutiny of only new FPIs coming from China and other neighbours of India, it has now changed its focus to existing investments as well.

The communication to custodians said, "...Urgently provide list of FPIs whose beneficial owner is from China and list of FPIs whose beneficial owner is from Hong Kong..."

Equity indices have been falling sharply across economies as the world grapples with the covid-19 pandemic. This has made many bellwether stocks cheaper and affordable for both domestic and foreign investors.

On Sunday, after HDFC Ltd said that People’s Bank of China (PBOC) had raised its stake in the Indian lender to 1.01% from 0.8% in March quarter through open market purchases, many began voicing concerns whether some of these stocks had become susceptible to acquisition, using open market transactions, through the foreign portfolio investor (FPI) route.

There are a total of 16 Chinese FPIs registered in India with $1.1 billion invested in top-tier stocks. The exact level of China's investment through direct and indirect (beneficial ownership) route is not in public knowledge.

Sebi and depositories disclose only top 10 jurisdictions which invest in India, and China is not one of them.

Asset managers say keeping a track of investments from China and Japan has been difficult traditionally.

"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," he said declining to be named.

Some of the big FPIs from China include PBOC, CIFM Asia Pacific Fund, China International fund management, Best Investment Corporation and Asian Infrastructure Investment. Some of these funds are also joint ventures with US based asset managers.

PBOC has more than a 1% stake in a listed company and that is HDFC Ltd. CIFM Asia Pacific Fund, a JV with JP Morgan Asset Management Co, holds a total 13.5% stake in Indian banks and infrastructure companies among others. In nine companies, it has a little above 1%, which is the reporting threshold.