Beijing lifts quota to US$150b for foreign investors

Drive to attract outside capital sees overseas renminbi investor programme extended

PUBLISHED : Saturday, 13 July, 2013, 12:00am
UPDATED : Saturday, 13 July, 2013, 5:09am

A huge jump in the quota for qualified overseas institutions to invest in mainland stocks and bonds was announced by Beijing yesterday, as it stepped up efforts to attract foreign capital.

The move, aimed at boosting liquidity on the mainland's weak stock market, reflected the new leadership's attempt to shore up investor confidence after the main stock market indicator lost 10 per cent this year.

The China Securities Regulatory Commission said the quota for the qualified foreign institutional investor scheme would be nearly doubled, to US$150 billion, from the current US$80 billion.

"Foreign investors are showing keen interest in the country's capital market," the CSRC said, and it would continue to attract long-term investors as a way to "reinforce the efforts to adjust the nation's economic restructuring and to upgrade the Chinese economy".

At the same time, the securities regulator said the renminbi qualified foreign institutional investor programme would be expanded to include Singapore and London as well as Hong Kong.

Beijing launched the QFII scheme in 2002, allowing institutions such as UBS and Goldman Sachs to convert foreign currencies into yuan for investments in mainland-listed stocks.

The RQFII programme, which allows select institutions to raise offshore yuan capital in Hong Kong to buy mainland stocks and bonds, was launched in 2011. Initially, only Hong Kong subsidiaries of mainland mutual fund firms and brokerages were eligible for raising RQFII funds.

At the end of last year, Beijing increased the RQFII quota to 270 billion yuan (HK$341 billion) from 70 billion yuan and began enlisting the help of foreign institutions based in Hong Kong to direct offshore yuan capital inflow into the share markets. The CSRC did not say whether it would increase the RQFII quota.

Howhow Zhang, the head of research at fund consultancy Z-Ben Advisors, said: "Regulators are actively seeking overseas capital influx, but the interest among foreign institutions doesn't appear as strong as they expected."

The existing quotas for QFII and RQFII schemes have yet to be used up. The CSRC said US$43.5 billion of the QFII quota and 105 billion yuan of the RQFII quota had been taken up.

QFII and RQFII investors now hold mainland stocks valued at only 1.6 per cent of mainland firms' total market capitalisation.

Wang Zhiwei, the chairman of GF Fund Management, said earlier that the response to RQFII funds was lukewarm in Hong Kong as investment returns were relatively low. The Shanghai Composite Index has been among the worst-performing indicators worldwide in the past three years.

The index fell 1.62 per cent yesterday, after a hefty 3.23 per cent jump on Thursday.