Masterforex: Hundreds of billions of hot money flow into China, and foreign exchange becomes a hot investment - masterfore

by master0722 on 2011-08-12 17:52:36

Masterforex: Hundreds of billions of hot money flows into China, foreign exchange becomes a hot investment engine

Source: Asia Foreign Exchange Network

Author: MasterForex

Recently, the expectation of RMB appreciation and the high-speed growth of the economy have made the Chinese market once again become a paradise in the eyes of global investors. Hong Kong, which relies on the mainland and has always had loose foreign exchange control, has become the best stepping stone for a large amount of speculative capital to enter the mainland.

According to reports from CCTV's "Economic Information Express", the funds (hot money) flowing into Hong Kong from various channels abroad have reached hundreds of billions. As a free trade port, Hong Kong has never had foreign exchange control, and funds from all over the world flow freely in and out of Hong Kong like water. They can flow into the mainland or back to the West.

After the hot money flows into the mainland, which areas will it flow into and how will it profit? This has become a hot topic of market discussion. These large-scale mobile funds, which have always aimed for short-term high returns, mainly flowed into the stock market and real estate market through bank remittances, trade, and investment channels according to past experiences. In the current environment of the financial crisis, with the weak stock market, continuous policy adjustments in the real estate market, and the expectation of inflation in the next few years based on international and domestic financial conditions, many investors are seeking a safe channel for their assets. Foreign exchange investment is the most suitable choice. Relevant analysts believe that the good performance of the foreign exchange investment market recently and the emergence of the new ECN trading model introduced by Masterforex Company (masterforex.org/cn/) indicate that the foreign exchange investment field may become a new investment engine.

In 2006, Bank of Communications quietly piloted foreign exchange margin trading in Hangzhou. The choice of Hangzhou as a pilot was not accidental. According to informed sources at the Bank of Communications, on one hand, the original foreign exchange trading system developed by the Hangzhou branch of the Bank of Communications already had a certain level of competitiveness among peers; on the other hand, foreign exchange margin trading business was very active in the Jiangsu-Zhejiang region, and conducting a pilot in this area would be beneficial for business promotion.

The emergence of this new ECN trading model operates on a T+0 trading system, where shares purchased on the same day can be sold on the same day, allowing investors to adjust their investment direction based on their own analysis and judgment of the market. Moreover, different from the traditional physical auction trading method, this share-based electronic trading model makes the investment process more efficient. An enthusiastic investor said that the change in the circulation mechanism would also increase the participation enthusiasm of more idle funds in the market.

Previously, for hot money, due to the high threshold, poor investment environment, unfamiliarity, and lack of understanding of the foreign exchange investment field, which is more professional, these funds often did not participate much, and the scale was also small.

Recently, Zhou Xiaochuan, the governor of the People's Bank of China, proposed the pool theory regarding the management of hot money, pointing out that short-term speculative funds could be put into the pool through some regulatory measures when they flow in, and released from the pool when they withdraw, thus greatly reducing the impact of abnormal capital flows on the Chinese economy. His theory was mostly interpreted by outsiders as keeping those troublemaking foreign capital within the virtual economy and not letting them flow too much into the real economy, so as not to add unstable factors to the economic situation.

Relevant analysts believe that in response to the influx of hot money, the government may soon introduce relevant control measures, such as restricting hot money from entering the real economy through disguised equity investments, etc. Under the circumstances of a weak stock market and declining real estate transaction volume, the new appearance of investment in the foreign exchange investment field and the new ECN trading model may become a new choice for more market investors.