Center

More overseas institutions given go-ahead to invest

By Zhang Ran (China Daily)
Updated: 2006-04-15 09:04

China granted more qualified foreign institutions quotas to invest in its yuan-denominated shares and bonds on Friday.

The State Administration of Foreign Exchange (SAFE) announced that it had granted quotas to two new qualified foreign institutional investors JF Asset Management and the DBS Bank Ltd.

Meanwhile, JP Morgan Chase & Co, the third-biggest US bank, also won approval to invest more in China's yuan-denominated shares and bonds.

According to the SAFE, JP Morgan is allowed to invest an additional US$100 million in local-currency shares and bonds. This brings its total investment limit to $150 million.

DBS Group Holdings Ltd, Southeast Asia's biggest bank, won approval to invest US$100 million, while Hong Kong-based JF Asset Management Co is allowed to invest US$150 million, of which at least US$100 million is for an A-share fund.

China is widening overseas participation as part of its efforts to bring its stock markets in line with global norms and to revive benchmark indexes that have been in a five-year slump.

The government in July last year more than doubled the total quota available under the qualified foreign institutional investor (QFII) programme to US$10 billion.

As of Friday, China has approved 39 overseas institutions to invest a total of US$6.32 billion in yuan-denominated stocks and bonds.

China first launched the QFII programme in November 2002 as a way for foreign capital to access China's financial markets.

Under the QFII programme, investors with at least US$10 billion in assets and US$50 million to spend can apply to the securities and foreign-exchange regulators for a licence and a quota to buy yuan-denominated shares and bonds.

The mechanism not only further opened China's securities markets to overseas capital, but also gave foreign investors an opportunity to invest in the A shares market.

Evidence shows that foreign institutional investors are becoming among the most active players in the A-share market.

Figures from China Securities Depositary and Clearing Co Ltd (SD&C) show that the total number of registered QFIIs is increasing this year. There were no QFIIs registered with SD&C in February last year, while six QFIIs registered in February 2006.

However, it seems that not all the QFIIs have obtained good operating results in the past year. An expert pointed out that QFIIs tend to focus on the long-term returns rather than short-term income, while domestic institutional investors usually focus on short-term cash flow and the operating results of listed companies