CSRC plans new path for pension fund investments

PUBLISHED : Tuesday, 22 May, 2012, 12:00am
UPDATED : Tuesday, 22 May, 2012, 12:00am


Beijing will widen access to mainland equities for pension funds from Hong Kong, Taiwan and Singapore, reflecting its determination to lure more long-term investment into its volatile stock markets.

Apart from the existing qualified foreign institutional investor (QFII) scheme - an established channel for selected overseas institutions to trade yuan-denominated A shares - the China Securities Regulatory Commission (CSRC) plans to create a new system that can help pension funds profit from the mainland's economic growth, according to the official China Securities Journal.

China last month nearly tripled the QFII quota to US$80 billion from the previous US$30 billion last month, apparently wanting to boost its flagging markets with an injection of overseas capital.

Beijing has granted an additional US$4.37 billion quota to 38 qualified foreign institutions so far this year, more than double the US$1.9 billion granted for the whole of last year.

The CSRC reportedly believes the QFII programme was insufficient to meet huge demand from foreign pension funds and considered establishing a new channel for the funds to invest in A shares, but the newspaper did not elaborate.

The newspaper reported that the regulator would give special permission to pension funds' A-share investments if 'demand is really big'.

Beijing introduced the QFII scheme in 2003, and regulators hoped at the time that foreign investors would provide a steadying influence in a market where mainland investors have tended to buy on rumour, rather than on fundamentals.

'The regulator believes it's a positive move to bring in more long-term investors,' said Cindy Qu, an analyst with Z-Ben Advisers.

'I wouldn't be surprised if another QFII-style system is created to attract another multibillion-dollar fund influx.'

Over the past 10 years, QFIIs have made a combined profit of 151.6 billion yuan (HK$185.3 billion) from their A-share investments, the China Securities Journal said.

Since QFIIs made their debut on the mainland, they have been viewed as professional investors who are capable of sniffing out good investment opportunities. Some mainland investors try to match their strategy.

A source close to the CSRC said regulators would only welcome long-term investors such as pension funds while still being wary of introducing hedge funds, which were believed to add to market volatility.


foreign entities have been licensed this year to invest under the CSRC's QFII programme, up from three in the same period last year