Foreign currency to be invested abroad
By Zhang Ran (China Daily)
Updated: 2006-07-25 08:48
Securities firms are likely to be able to invest privately held hard foreign
currency abroad under a new government rule.
The new rule, which the
government began public consultation on yesterday, should encourage capital
outflow and reduce pressure for the yuan to appreciate.
"Securities firms
can set out an asset management plan to raise tradable foreign currency
domestically and invest it in financial products abroad," says the draft rule,
released yesterday by the China Securities Regulatory Commission
(CSRC).
The rule has been posted on the regulator's website and public
opinion will be sought until July 31.
"The rule will create diverse
investment opportunities for domestic capital. Instead of being limited to the
Chinese market, investors can now buy into international markets," said Li
Yongsen, professor with Renmin University of China. "It will increase investors'
investment portfolios and diminish risks."
"Hong Kong will be the first
targeted market for domestic brokerages, due to its close connection with the
mainland," said Jiang Jianrong, an analyst with Shanghai-based Shenyin Wanguo
Securities.
The rule, while bringing brokerages more business, will also
be a new challenge for securities firms, as domestic firms will have to
familiarize themselves with the overseas market, in which many of them lack
experience.
"Leading firms such as China International Capital Co Ltd and
CITIC Securities will have an advantage in such business, as they have some
overseas experience," said Li.
Besides allowing brokerages to raise funds for
overseas investment, the draft rule also includes regulations for brokerages'
asset management business.
"Brokerages can set out asset management plans
to invest in stocks, bonds market and funds," the draft rule says.
"Asset
management is actually a private equity activity, as brokerages are banned from
advertising for clients through mass media," said Jiang, adding that the rule
will be the country's first regulation on private equity activities.
(For more biz stories, please visit Industry Updates)
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