ING Bank of the Netherlands has become the first qualified foreign institutional investor (QFII) to forfeit part of an approved quota for buying mainland-listed yuan A shares and selected Chinese bonds.
The development reflected the reassessment by international investors of potential gains from a possible yuan revaluation as well as lingering concerns about China's restrictive QFII rules and the poor quality of mainland-listed companies, analysts said.
The State Administration of Foreign Exchange (SAFE) yesterday announced that it had halved ING's QFII investment quota to US$50 million for failing to meet a three-month deadline within which to deposit the $100 million initially approved in October.
The decision has trimmed to US$1.7 billion the total investment quota the mainland foreign exchange regulator has allocated to 11 QFIIs since the ground-breaking scheme, which provides a limited opening of China's capital account, became operational last June.
'When we received the quota, we did a survey among our clients to get a feel from them as to what it is they would like to invest in,' said a Hong Kong-based spokesman for the Dutch bank. 'We felt at this stage it would be more prudent to invest US$50 million.'
The decision was not affected by talks to sell most of ING's Asian equity business to Australia-based Macquarie Bank, he added. The Dutch financial institution intends to retain its QFII licence even after the proposed sale.
