Learn Mandarin online - QDII expanded to include securities, fund companies

BIZCHINA / Center

QDII expanded to include securities, fund companies

By Zhang Ran (China Daily)
Updated: 2007-06-21 08:21

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 ($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 ($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.

Special coverage:
Markets Watch

Related readings:
HSBC Bank will roll out expanded QDII plan
Insurers to invest in overseas equity markets
Analysts upbeat over QDII moves QDII could help save China's bubble
market

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.

(For more biz stories, please visit Industry Updates)

Learn Chinese, Learn Mandarin online