Watchdog: Quota for QFIIs set to increase By Liu Weiling and Hu Yuanyuan (China Daily) Updated: 2005-06-28 01:48
China's securities watchdog yesterday promised to increase the investment
quota for qualified foreign institutional investors (QFIIs) as part of a
multi-pronged effort to boost the stock market.
Shang Fulin(L),
chairman of China Securities Regulatory Commission, speaks at a press
conference on China's stock market in Beijing June 27, 2005.
[newsphoto] | "QFIIs have played an active role in
China's stock market,?Shang Fulin, chairman of the China Securities Regulatory
Commission (CSRC), said yesterday at a press conference. "We will expand the
pilot programme and steadily increase the investment quota."
However, he declined to disclose figures for the new quota.
Shang's remarks come among mounting pleas from leading foreign investment
banks, such as Merrill Lynch and Deutsche Bank, for an increase in the quota as
the US$4 billion set in 2003 has already been used up.
"This shows that foreign investors are very optimistic about China's stock
market," said Liu Jipeng, a renowned stock market expert and professor at the
Capital University of Economics and Business. "Raising the quota will really
stimulate the market." As well as QFII, more domestic capital will also be
encouraged to enter the stock market, said Shang.
A bigger proportion of insurance capital, corporate pension and social
security funds will be allowed into the stock market while institutional
investors will be fostered.
A key step will be to accelerate the pace of commercial banks launching fund
companies.
Earlier this year, Industrial and Commercial Bank of China (ICBC), China
Construction Bank and Bank of Communications got the nod to launch fund
companies; and Shang said ICBC has already finished the preparatory work for the
launch.
To pump more insurance capital into the stock market, the government will
also look at the possibility of allowing insurance institutions to set up fund
companies.
Shang hinted that more policies favourable to the stock market are to be
announced.
"There remains much room for further policy adjustment," he said. "Some
policies, for example those announced to curb overheated investment in the stock
market, don't suit the current situation." According to Liu, the policies
include those of the early 1990s which forbid State-owned enterprises from
speculating in the stock market, stop banks from entering the stock market, and
prohibit financial institutions from conducting mixed operations.
Shang stressed that "policies to encourage capital market investment will be
enhanced further." With China's stock market languishing, Shang said the
government has studied "various measures" to safeguard stock market stability.
But he did not confirm the establishment of a buffer fund which has been a hot
topic in recent months.
"We must strive to maintain market stability while introducing
non-tradable-share reform, which is a significant step in the development of a
capital market," he said.
Experts said Shang's remarks demonstrate the central government's
determination to make non-tradable-share reform a success.
"This means the buffer fund is under consideration," Liu said. "The
government will take necessary measures to ensure the smooth reform of
non-tradable shares." However, Yi Xianrong, a researcher with the Chinese
Academy of Social Sciences, said a buffer fund would hardly stabilize the
market. Instead, it would only eat up State finances, he
warned.
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