Tweet
http://www.bloomberg.com/apps/news?p...d=aopaPM8Stimw
Sept. 5 (Bloomberg) -- China plans to raise the amount foreign funds can invest in stocks by 25 percent to $1 billion, encouraging inflows after the benchmark index slumped into a bear market last month.
The limit on individual quotas will rise from $800 million and the lockup period for some investors will be cut to three months from one year, the State Administration of Foreign Exchange said in draft rules published on its Web site yesterday. Combined investments under the so-called qualified foreign institutional investor program will remain capped at $30 billion.
Hong Kong’s Hang Seng Index jumped as much as 3.2 percent on speculation efforts to bolster stocks in China will benefit the local market. The Shanghai Composite Index, which closed before the announcement, rose the most in six months on Sept. 3, rebounding from a 22 percent decline in August, after the securities regulator said it will promote a “stable and healthy” market.
“The news of expanding the quota is positive to the stock market at this sensitive stage,” said Sun Jian, a Shanghai- based analyst at Shenyin & Wanguo Securities Co.
The Shanghai Composite has tumbled from its Aug. 4 peak on concern banks will be forced to rein in lending, derailing a recovery in the world’s third-largest economy.
The announcement came hours after the banking regulator said it may take years to implement stricter capital requirements for banks. The Shanghai index closed 0.6 percent higher before the State Administration’s statement yesterday, after jumping 4.8 percent on Sept. 3.
Lockup Rules
As of August, 87 qualified foreign institutional investors including UBS AG and Morgan Stanley were permitted to invest a combined $15 billion in local-currency stocks and bonds.
“We have raised the limit for each fund to $1 billion within the current total $30 billion size of all funds to encourage more good investors to come in,” said Chu Yumei, deputy head of the capital account department at the regulator. “We’ll grant new quota under the existing total limit.”
SAFE will shorten the lockup period for some medium and long-term QFII funds such as pension funds and insurance funds to three months, according to the statement. Other QFII investors will still be subject to a one-year lockup.
The move, first announced last year as part of the Strategic Economic Dialogue agreement between Chinese Vice Premier Wang Qishan and U.S. Treasury Secretary Henry Paulson, indicates the government’s policy on opening up its capital market to foreign investors.
Capital Requirements
The draft rules aim to encourage “medium- and long-term investment” and to make investment operation and risk control more “convenient,” the currency regulator said in the statement.
“Any improvement in the QFII facility would be welcomed by foreign investors, but China remains a difficult and frustrating market to invest in,” said Singapore-based Fraser Howie, author of two books on China’s stock market.
SAFE first issued rules regulating QFII in 2002, and approved the first QFII, UBS, in May 2003. UBS, with $800 million, has the highest quota among foreign investors, according to data compiled by Bloomberg.
The China Banking Regulatory Commission, seeking to assuage concerns that stricter capital requirements for banks will trigger a plunge in new lending and the stock market, said yesterday that measures to force banks to deduct holdings of other lenders’ subordinated debt from their capital would be taken “over the course of years.”
Sept. 5 (Bloomberg) -- China plans to raise the amount foreign funds can invest in stocks by 25 percent to $1 billion, encouraging inflows after the benchmark index slumped into a bear market last month.
The limit on individual quotas will rise from $800 million and the lockup period for some investors will be cut to three months from one year, the State Administration of Foreign Exchange said in draft rules published on its Web site yesterday. Combined investments under the so-called qualified foreign institutional investor program will remain capped at $30 billion.
Hong Kong’s Hang Seng Index jumped as much as 3.2 percent on speculation efforts to bolster stocks in China will benefit the local market. The Shanghai Composite Index, which closed before the announcement, rose the most in six months on Sept. 3, rebounding from a 22 percent decline in August, after the securities regulator said it will promote a “stable and healthy” market.
“The news of expanding the quota is positive to the stock market at this sensitive stage,” said Sun Jian, a Shanghai- based analyst at Shenyin & Wanguo Securities Co.
The Shanghai Composite has tumbled from its Aug. 4 peak on concern banks will be forced to rein in lending, derailing a recovery in the world’s third-largest economy.
The announcement came hours after the banking regulator said it may take years to implement stricter capital requirements for banks. The Shanghai index closed 0.6 percent higher before the State Administration’s statement yesterday, after jumping 4.8 percent on Sept. 3.
Lockup Rules
As of August, 87 qualified foreign institutional investors including UBS AG and Morgan Stanley were permitted to invest a combined $15 billion in local-currency stocks and bonds.
“We have raised the limit for each fund to $1 billion within the current total $30 billion size of all funds to encourage more good investors to come in,” said Chu Yumei, deputy head of the capital account department at the regulator. “We’ll grant new quota under the existing total limit.”
SAFE will shorten the lockup period for some medium and long-term QFII funds such as pension funds and insurance funds to three months, according to the statement. Other QFII investors will still be subject to a one-year lockup.
The move, first announced last year as part of the Strategic Economic Dialogue agreement between Chinese Vice Premier Wang Qishan and U.S. Treasury Secretary Henry Paulson, indicates the government’s policy on opening up its capital market to foreign investors.
Capital Requirements
The draft rules aim to encourage “medium- and long-term investment” and to make investment operation and risk control more “convenient,” the currency regulator said in the statement.
“Any improvement in the QFII facility would be welcomed by foreign investors, but China remains a difficult and frustrating market to invest in,” said Singapore-based Fraser Howie, author of two books on China’s stock market.
SAFE first issued rules regulating QFII in 2002, and approved the first QFII, UBS, in May 2003. UBS, with $800 million, has the highest quota among foreign investors, according to data compiled by Bloomberg.
The China Banking Regulatory Commission, seeking to assuage concerns that stricter capital requirements for banks will trigger a plunge in new lending and the stock market, said yesterday that measures to force banks to deduct holdings of other lenders’ subordinated debt from their capital would be taken “over the course of years.”