China lets foreign sovereigns, c.banks exceed $1 billion investment limit

SHANGHAI Sat Dec 15, 2012 12:52pm IST

A man stands on a boat on the Huangpu River near the Pudong Lujiazui financial area in Shanghai November 12, 2012. REUTERS/Aly Song

A man stands on a boat on the Huangpu River near the Pudong Lujiazui financial area in Shanghai November 12, 2012.

Credit: Reuters/Aly Song

Related Topics

A statue of Ganesh, the deity of prosperity, is carried in a taxi to a place of worship on the first day of the ten-day-long Ganesh Chaturthi festival in Mumbai August 29, 2014. REUTERS/Danish Siddiqui

Ganesh Chaturthi Festival

During Ganesh Chaturthi idols will be taken through the streets in a procession accompanied by dancing and singing, and will be immersed in a river or the sea in accordance with Hindu faith.  Slideshow 

SHANGHAI (Reuters) - China's foreign exchange regulator has removed the $1 billion limit for foreign sovereign wealth funds, central banks and monetary authorities buying Chinese assets through the Qualified Institutional Investor Programme (QFII).

The new regulations, published on the website of the State Administration of Foreign Exchange (SAFE), did not specify a new top limit, merely that the funds can apply to invest over $1 billion.

The policy is aimed at sovereign wealth funds like Qatar Holdings and the Hong Kong Monetary Authority, both of which have already been approved to invest up to $1 billion each through QFII.

SAFE will retain the right to approve or deny individual applications on a case-by-base basis.

Chinese regulators have said in the past that facilitating increased foreign investment in Chinese assets will help restore confidence in China's stock markets, which have declined by over 60 percent since November 2007.

But the total amount of foreign money allowed to enter the domestic stock market remains small, and the new rules do not increase it.

Combined foreign investment in China's stock market accounts for only 1 percent of total market capitalization.

The overall net quota for the QFII programme remains at its current $80 billion, of which SAFE has only allocated $36 billion for use by QFII funds as of November 30.

Foreign appetite for Chinese equities has shown some signs of increase in recent months, especially in Hong Kong, but the weak performance of stock-focused QFII funds - and complaints about high fee structures - has dampened appetite.

(GRAPHIC: Comparison of QFII fund performances in China link.reuters.com/xun34t)

To drum up additional interest, Chinese regulators, including officials from the Shanghai and Shenzhen stock exchanges, went on an overseas tour in September to advocate for Chinese equities and QFII in particular.

The new regulations also relax restrictions on the ability of funds to remit principal and income from investments, but made no further clarifications as to how China will tax QFII profits, an area of enduring uncertainty for QFII investors.

Chinese stock markets on Friday had their biggest single-day jump since 2009, which some analysts attributed to expectations of further relaxation of rules on foreign investment in stocks.

Others, however, offered alternative explanations for the unusual jump, such as behind-the-scenes share buybacks by state-owned entities trying to engineer a rebound for the end of the year.

(Editing by Michael Perry)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Current Account

Current Account

Balance of payments surplus for third straight quarter  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage