BEIJING, Oct 11 (Reuters) – China has formally relaxed rules on inbound portfolio investment, raising the maximum sum a single institution may invest to $1 billion from $800 million, the State Administration of Foreign Exchange (SAFE) said.
The new rules governing China’s Qualified Foreign Institutional Investor (QFII) programme also shorten the lock-up period for insurers and pension funds to three months from the one-year requirement that other investors must follow.
The changes, which came into effect on Sept. 29, are broadly in line with draft proposals released in early September.
According to a statement on SAFE’s website, the currency regulator had granted investment quotas totalling $15.72 billion to 78 investors by the end of September. UBS was the only investor to have used its full $800 million quota.
Separately, SAFE said actual capital inflows under the QFII programme had reached $14.50 billion at the end of August compared with a cumulative approved quota at the time of $15.32 billion.
Source: Reuters, 11.10.2009
SHANGHAI (Dow Jones)–China is raising the maximum limit a single qualified foreign institutional investor, or QFII, can invest in the domestic stock market to US$1 billion from US$800 million, the country’s foreign exchange regulator said over the weekend in rules that take effect immediately.
The relaxation of the rules under the program that allows designated foreign investors to trade yuan-denominated A-shares had been expected, but its timing comes as China’s stock markets are set to reopen for a full week of trading on Monday after being shut since Oct. 1 for a holiday break.
The State Administration of Foreign Exchange (SAFE) said that it may adjust the QFII quota ceiling as needed in the future and that reviews under the QFII program, first launched in 2003, will be more balanced going forward.
However, the revised rules also continue to underscore the strong oversight Beijing is keeping on cross-border capital flows, highlighting China’s very cautious approach toward opening up its domestic stock markets and liberalizing the capital account of the world’s third largest economy.
In statements posted on its Web site late Saturday, SAFE said that the lock-up period of funds for some institutional investors under the QFII program will be shortened to three months, though for other funds the one-year lock-up time remains enforce.
The shorter lock-up period that applies to pension funds, insurance funds, charity funds and government funds, among others, is aimed to encourage medium- and long-term investing, SAFE said.
The revised rules, which were first circulated as a draft proposal for public comment in early September, took effect Sept. 29, according to the SAFE statements. The maximum quota for a single QFII is being raised to US$1 billion, from US$800 million and the minimum quota application each time must be at least US$50 million, the revised rules state.
“SAFE can adjust the ceiling based on economic and financial trends, the supply and demand in the forex market, and the balance of payment situation,” the rules state.
China has given preference to review and approval of pension funds, insurance funds, mutual funds, charity funds and government funds under the QFII program, SAFE said.
China’s QFII program allows qualified foreign institutional investors to invest in securities traded on the country’s domestic stock markets, namely A-shares in Shanghai and Shenzhen, which this year have been one of the world’s outperforming stock markets.
As of the end of September, a total of 78 foreign institutions obtained the QFII quota totaling $15.72 billion, SAFE data showed.
The approval for QFII status comes from China’s securities regulator, but it is SAFE that has authority over granting quotas. This year SAFE has granted 12 QFIIs quotas with the most recent being Bank Negara Malaysia, the Malaysian central bank, and Deutsche Bank Group’s DWS Investments. Both were each approved US$200 million in QFII quotas in September, SAFE data showed.
Once approval for a quota is given, the QFII has to wait a year before applying for a new quota; and the QFII has to remit the approved funds within six months from getting approval, the rules state.
The revised rules on QFII programs also allow a single QFII to open different types of investment accounts and allows more convenience in foreign exchange, redemption and other area. The administration said it may reduce a QFII’s investment quota if it fails to effectively use the quota within two years of approval. SAFE also strictly forbids QFII to transfer or sell investment quotas to others.
In a move to increase transparency in the QFII program and the Qualified Domestic Institutional Investors program, which allows domestic investors to invest in overseas securities, SAFE said it will regularly disclose the status of its approval process. As of the end of September, SAFE also approved 56 QDIIs so far with a total of $55.95 billion investment quota, SAFE data showed.
Source: DownJones, 11.10.2009
Filed under: China, Exchanges, News, China 中国, CSRC China Securities Regulatory Commision, QDII, QFII, SAFE State Administration of Foreign Exchange, SSE Shanghai Stock Exchange, SZSE Shenzhen Stock Exchange