Some Chinese brokerages have restricted clients from making fresh investments in cross-border swaps, four people familiar with the matter said on Wednesday, a move that appeared aimed at putting the brakes on overseas investment.
Institutional clients were notified on Tuesday evening that they could no longer add new overseas investment exposure through total return swaps, or TRS contracts, the four people said. Under the latest move, investors will only be able to maintain or sell down their existing positions, two of the people said.
All of the people spoke on condition of anonymity because of the sensitivity of the information.
Beijing has been on a push to curb capital outflows and tighten scrutiny of overseas investments. In February 2024, regulators clamped down on the total amount of the swaps domestic investors could invest in. The latest move suggests a further tightening.
At least four brokerages, including state-owned China International Capital Corp (CICC), have been restricting clients from making new investments in the swaps this week, two of the people said.
CICC, one of the major Chinese brokerages licensed to offer the contracts, is a top player in the space. It did not immediately respond to requests for comment.
The contracts are derivatives that give onshore investors exposure to movement in offshore asset prices, although without actually owning foreign securities.
Many onshore private funds have used TRS products this year to invest in overseas markets, particularly tech and chip stocks, which have rallied sharply.
Reuters
