Foreign Firms Admitted into China's Securities Market

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Last updated at: (Beijing Time) Tuesday, May 27, 2003

Foreign Firms Admitted into China's Securities Market

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China has taken its historic first step to practically open up its securities market to foreign companies.

Monday in Beijing, UBS Warburg and Nomura Securities became the first two financial service firms to get a qualified foreign institutional investor (QFII) licence.

The China Securities Regulatory Commission (CSRC) -- the nation's securities watchdog -- announced the move on its website.

A commission spokeswoman said more QFII applications from overseas institutions were being reviewed. They should be approved if they meet the required criteria.

Deutsche Bank and Goldman Sachs, two global banking giants, are among those waiting in the wings for a QFII licence.

It is an entry ticket to China's US$500 billion A-share market as well as the bond market, which used to be only available to domestic traders.

Global investment bank UBS Warburg led all others in the pursuit of a licence, as it was the first to lodge a QFII application to the CSRC, which occurred in mid-March.

The bank is delighted and very excited to be among the first to gain approval, according to Rodney Ward, chairman of UBS Warburg Asia. He said UBS had chosen US-based Citibank as its custodian and authorized the Bank of China to handle its renminbi clearing.

China issued a regulation guideline on the QFII scheme in November and formally adopted it at the end of the year.

It was a transitional measure to open up the capital market to foreign investors when the renminbi was still not fully convertible under the capital account.

Over the past few months, a number of domestic and foreign banks have been approved as QFII custodian banks, where special renminbi accounts are opened to enable domestic trading.

With CSRC approval, a licensed foreign institution still has to apply for a foreign exchange quota used for securities investment, which ranges from US$50 million to US$800 million.

The next step for UBS Warburg is to apply to the State Administration of Foreign Exchange for a foreign exchange investment quota, which should take another 15 working days, and would allow investment and trading to commence, Ward said.

Nicole Yuen, head of China equities at UBS Warburg, said the bank was ready to remit in the initial amount of fund and start trading as soon as the paperwork was completed. More money will be remitted later on.

The operation of the QFII scheme is expected to bring more fresh funds and expertise to China's securities market, said Lu Lixin, head of the research and development centre at Beijing Securities.

It will help activate trading in the bourses, he said. But the amount of funds flowing in and the outcome of the move still depends on the performance of the market and quality of the listed companies.

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