UBS bids to lift stake in A-share markets

PUBLISHED : Tuesday, 25 January, 2005, 12:00am
UPDATED : Tuesday, 25 January, 2005, 12:00am

UBS is seeking an increase of US$200 million to US$300 million in its quota of A shares because of strong demand from overseas investors, despite the prospect of another weak year in the market, the bank said yesterday.

In 2003, UBS became the first foreign company to receive an allocation for the qualified foreign institutional investor (QFII) scheme and has the largest quota of the 30-plus foreign firms now licensed, with US$800 million invested in stocks, convertibles, equity funds and bonds.

Nicole Yuen, the head of UBS China Equities, said that the bank's major institutional investor clients were confident about the market in which they planned to be long-term players. Of its quota, no more than 10 per cent has been invested in bonds. The rest is in A shares and related instruments.

'We hope for an increased quota, US$200 million to US$300 million, and hope that the overall size of QFII will increase,' she said.

Lord Leon Brittan, a vice-chairman of UBS Investment Bank, said the total quota of QFII had reached US$3.5 billion and that the enthusiasm of clients to invest in China was outstanding.

'The QFII played a significant part in changing the perception abroad of the Chinese stock market, which had previously been a closed book,' he said.

But the A-share markets are currently in a long-term slump. The Shanghai market closed at a five-year low on the first trading day of the new year.

Jonathan Anderson, the head of Asia-Pacific economics for UBS, said that just 150 to 200 of the 1,200 companies listed recorded price rises last year. 'The foreigners look at 40 to 60 companies in the market, with good performance and strong revenue,' he said. 'Many of these investors have made money. I still see a lot of interest.

'Now that the ban on new issues has been lifted, good new companies will be listed, including financial, retail, export and technology companies. Investors are interested in them. The QFII inflow will go up and up. But it will be a boring year for the equities markets in 2005. The A-share market will fall.'