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UBS seeks to increase China investments
( 2003-09-02 11:25) (Financial Times)

UBS, the Swiss financial services group, is negotiating with regulators in China to increase the amount of money it can invest there as part of a government-sponsored scheme.

The group, which was one of the first foreign banks to gain approval under the Qualified Foreign Institutional Investor programme, is also pressing for more time to raise money from clients.

UBS's moves - which come only days before it is required to stop accepting applications from investors - suggest that it is seeing stronger demand for QFII products than expected. The bank has approval to invest US$300m, the highest quota awarded to foreign institutions.

Its negotiations could encourage other banks, particularly those that applied for lower quotas than UBS, to follow suit. Citigroup, Morgan Stanley, Nomura Securities, Goldman Sachs, and Deutsche Bank are among those that have also won permission to invest in QFII.

The scheme, which is part of China's attempt to raise the standard of its capital markets, allows approved banks to trade in the US$500bn A-share market as well as in Treasuries, convertibles, corporate bonds, initial public offerings and secondary share issues.

Since UBS and Nomura won approval in May, the scheme has suffered from the impact of Sars and summer holidays, which kept investors away from the markets. QFII has also frustrated some investors because of its restrictions on repatriation and the high valuations of A-shares.

However, Nicole Yuen, head of China equities at UBS, said that sentiment had shifted recently.

UBS was given three months to meet its quota. Its window closes this Thursday, September 4.

Ms Yuen stressed the talks were part of an ongoing dialogue with the China Securities Regulatory Commission and the State Administration of Foreign Exchange, which oversee QFII. A decision is expected in the next few days.

UBS said it "would fully realise its expectations" for QFII and that meeting the quota was not its priority with the scheme.

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