Chinese securities and fund-management firms will be allowed to
invest overseas in a move seen as cooling the overheated mainland
stock market.
The China Securities Regulatory Commission (CSRC) said yesterday
that eligible financial firms will get licenses as qualified
domestic institutional investors (QDII) starting July 5. The scheme
has so far been limited to banks and insurers.
For eligibility, fund-management firms must have net assets of
not less than 200 million yuan (US$26 million) and at least two
years' experience in stock investment. Securities companies must
have a net registered capital of no less than 800 million yuan
(US$105 million) and at least one year's experience in collective
asset management, according to the rule.
It is estimated that a score of securities and fund firms will
meet the standards. They will also be able to join banks and
insurers to launch investment products.
"If the program goes well, we will consider lowering the
barriers for more firms to join in," Li Zhengqiang, vice-director
of the CSRC's fund companies' supervision arm, said.
He said that given their lack of overseas investment expertise,
local securities and fund companies will be allowed to hire
international consultants.
The move is set to diversify mainlanders' investment options and
help develop local financial firms' outbound investment capability,
a CSRC official said.
The securities watchdog said it is working with the State
Administration of Foreign Exchange (SAFE) to decide on the
financial firms' foreign currency quotas.
The major index of the A-share market yesterday plummeted 88
points, or 2.07 percent, to close at 4181, over fears that the
expanded QDII program will lead to capital outflows from the
mainland stock market.
"H shares will be the prime beneficiary of the expanded QDII
program. Increasing QDII money outflows to overseas markets and a
relatively cheap valuation will make Hong Kong's H shares more
attractive than A shares," said Jing Ulrich, managing director of
JP Morgan Securities.
According to SAFE data, 19 banks and three insurers have been
granted QDII licenses since the government launched the scheme in
2004.
(China Daily June 21, 2007)