Banks branch out on QDII offers

PUBLISHED : Saturday, 19 May, 2007, 12:00am
UPDATED : Saturday, 19 May, 2007, 12:00am

HSBC, Standard Chartered and Bank of East Asia said they would launch new products under the mainland's qualified domestic institutional investor (QDII) scheme as the government last week expanded the scope to overseas stocks.

Their plan follows comment by the China Banking Regulatory Commission that it would not grant any more QDII quotas until the existing US$15 billion was fully used.

Only about 3 per cent of the QDII quotas were used so far, as mainland investors are not keen on buying related products amid the country's surging stock market.

Banks could use QDII quotas to invest only in low-yielding fixed income and money market products in the overseas markets before the expansion.

HSBC executive director Peter Wong Tung-shun said that QDII products would be attractive only if they had a return of more than 3 to 5 per cent as the market expected the value of the yuan to appreciate by 3 to 5 per cent this year.

'With the products banks are allowed to invest in equity, new QDII products will have their attractiveness but their risk will also increase accordingly,' he said.

Bank of East Asia, Hong Kong's fifth-largest bank, plans to launch its fifth QDII product, deputy chief executive Chan Kay-cheung told Reuters yesterday.

The fund, managed by Swiss bank UBS, would come from its US$300 million quota, about one-third of which had been used.

Mr Chan said the lender was also preparing to launch another QDII product to invest directly in overseas stocks. Standard Chartered also said it would launch a new QDII product but did not give details.

Paulus Mok, Citi's China country treasurer, said the bank aimed to introduce a number of new offerings in the coming months to provide their mainland customers access to major overseas investment.