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China to raise foreign fund limits to one bln dlrs
AFP - Saturday, September 5
SHANGHAI (AFP) - - China's foreign exchange regulator said Friday it planned to raise the limits on securities investment by foreign institutions to one billion dollars from 800 million dollars.
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The draft rules, which govern the Qualified Foreign Institutional Investor, or QFII programme, were published on the State Administration of Foreign Exchange website.
The QFII programme, launched in 2003, is the main way foreign institutions can invest in yuan-denominated equities in China, where the authorities keep strict control over capital flows.
The new rules are aimed at "attracting mid- and long-term investments," the foreign exchange watchdog said, adding it would accept opinions on the changes over the next two weeks.
The agency also slashed the lockup period on investments made by qualified foreign pension funds, insurance companies, and mutual funds down to three months from one year previously.
The changes come after China's benchmark stock index slumped 6.74 percent on Monday, the biggest single one-day fall in 14 months due to concerns over slower lending and a new share supply glut. It sank 22 percent in August.
The QFII quota increase would likely boost investors' sentiment temporarily until attention shifts to economic data due next Friday and upcoming initial public offerings, analysts said.
"It might bring some upbeat sentiment for the share market next week. But such an increase in investment quotas does not necessarily mean (China) will actually grant foreigners more quotas," Zhang Gang, a Beijing-based analyst with Southwest Securities said.
"They are likely to remain cautious on foreign funds' investment."
China agreed in talks with the United States in late 2007 to raise the QFII ceiling for the combined quotas to 30 billion dollars from 10 billion dollars, but total approvals so far were about half that amount at 15 billion.
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