Beijing confident of QDII impact on markets

The mainland's long-awaited qualified domestic institutional investor programme will have a greater than expected impact on the markets, according to the central government official in charge of foreign exchange policy.

Hu Xiaolian, the head of the State Administration of Foreign Exchange, reportedly told Secretary for Financial Services and the Treasury Frederick Ma Si-hang yesterday: 'The central government is very keen on implementing the QDII programme and the scheme is going to go beyond market expectations.

'The QDII scheme is going to strengthen the financial market reform in China.'

Some Hong Kong analysts have said QDII, which allows banks, fund management firms, insurers and securities houses to convert clients' money into foreign currency for investment overseas, will only involve small amounts, but Mr Ma quoted Ms Hu as saying this would not be the case.

Commercial banks were given the go-ahead to apply for licences on Tuesday, but Ms Hu did not give a timetable for full implementation of the programme.

The China Securities Regulatory Commission has expressed concerns in the past that QDII may hurt the domestic stock markets, but a source said the CSRC was now supporting the policy.

Mr Ma, in Beijing for a Hong Kong Securities Institute seminar, said: 'Mainlanders have savings of 31 trillion yuan and I believe some of the institutions and individuals could well use Hong Kong as an investment platform to buy into the local stock and debt markets.

'Also, Hong Kong has a pool of talent familiar with investments to help mainlanders invest overseas.

'What Hong Kong markets need to do is prepare more investment products for mainlanders.'

He said Hong Kong banks, brokers and fund managers would benefit from QDII. 'Although mainlanders have not yet been allowed to open accounts with Hong Kong brokers, the brokerage industry will benefit from a higher turnover driven by QDII.'

Mr Ma said the Hong Kong government had introduced measures to prepare for QDII, including law changes last month to exempt offshore funds from profit tax. 'The tax exemption has enhanced the legal platform to attract overseas and mainland funds to invest in Hong Kong.'

Tina So, the chief investment officer and managing director of BOCI Investment Managers, said QDII was 'an important step for China, [as it helps] mainland investors diversify their risk portfolios'.

From a fund management company's point of view, the move offered big business opportunities and challenges, she said.

Sally Wong, executive director of the Hong Kong Investment Funds Association, said QDII would help mainland investors achieve better returns on their investments as at the moment most mainlanders put their savings in bank deposits.