| Open season on foreign markets |
SHANGHAI, May 21 -- Chinese investors will soon have the chance to play overseas stock markets through their bank under an expanded qualified domestic institutional investor (QDII) scheme.
Commercial banks can now invest up to 50 percent of their funds in QDII products, with a single holding capped at five percent of a product's asset value.
Officials hope the new rules will lessen China's huge foreign exchange reserves and ease the rapidly rising domestic stock market.
But QDII products have proved unpopular so far - and investors need a minimum stake of 300,000 yuan (US$39,077) to buy such products, the regulator said.
The requirement is much higher than for previous QDII products, which need at least 50,000 yuan or 80,000 yuan.
"Gosh, 300,000 yuan for QDII? I might invest such an amount if I had one million yuan on hand for investment," said Xiao Ma, a local white-collar worker who earns about 10,000 yuan a month.
"For me, investment in the domestic stock market, like the forex-backed B share market, is more feasible as there is not such a high capital requirement."
However, some analysts feel there is a market for the QDII scheme. "The revision of rules will help dampen the attraction of the domestic stock market a little as investors can now also benefit from the global market," said Liao Qun, an economist at Citic Ka Wah Bank.
The barometer Shanghai Composite Index soared 130 percent last year and has grown more than 40 percent this year.
China introduced the QDII program in July last year to channel part of its mounting foreign exchange reserves, which topped US$1.2 trillion at the end of March, the world's largest trade surplus.
Authorities took steps to boost the appeal of QDII products with the expanded investment channels and last week's announcement of new quotas.
Last week, the Nanyang Commercial Bank became the first Chinese lender in three months to win a foreign currency quota for overseas investments.
Nineteen banks holding QDII status share a combined quota of US$15 billion, including a new increase of US$300 million, said the State Administration of Foreign Exchange.
Bank of East Asia is one that has big ambitions to ride on the new expanded QDII products.
"We have been studying and researching investing in overseas stock markets under the QDII scheme before the new channels were opened up," said Raymond W. Y. Chang, executive vice president.
The bank has a quota of US$300 million from the State Administration of Foreign Exchange to invest overseas, and has so far used about one-third of its quota.
"It didn't come as a surprise to learn about the expanded QDII channels after average sales over the year," said Wu Kan, a Shanghai Securities Consulting Co analyst. "The new move will boost the appeal of the QDII products, but a rush is unlikely as the yuan is still rising, aside from the draw of the mainland stock market."
However, some investors believe the overseas currency B-share market, which has lagged the performance of the yuan-backed A share market, still offers a chance to cash in.
Guo Mama, a 54-year retiree, opened an account to invest in B-shares last week. So far she has made about 10 percent. "I am planning to convert more yuan to US dollars and add holding of B shares," she said. "For me, the QDII concept is still too far away."
The yuan is also widely expected to continue rising. The only question is how fast it can gain.
The People's Bank of China allowed a freer trade of the yuan by expanding the daily trading band of the currency from 0.3 percent to 0.5 percent from today.
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