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Securities regulator to raise investment quota for QFIIs

By Zhao Qian  (Global Times)

08:16, July 30, 2012

China will make it more attractive and easier for qualified foreign institutional investors (QFIIs) to invest in the country's capital market, according to a revised regulation released by the securities regulator over the weekend.

The regulation, issued by the China Securities Regulatory Commission, pledges to allow the combined stake holdings by QFIIs in any listed companies in A-share market to reach up to 30 percent from the current 20 percent.

The QFIIs will be allowed to invest in the interbank bond market and private placement bonds issued by small- and medium-sized enterprises so as to expand their investment scale, the regulation said.

It also lowers the QFII threshold and allows QFIIs to choose more than one securities dealer when they invest in China's capital market.

The QFII scheme was launched in 2003 to allow licensed foreign investors to buy and sell yuan-denominated A shares on the Shanghai and Shenzhen stock exchanges.

"Concerns over capital outflow, arising mainly from the recent depreciation of the yuan against the US dollar, have prompted the regulator to lower the QFII threshold in a bid to encourage capital inflows," said Zhang Taowei, an associate professor at the School of Economics and Management of Tsinghua University, Sunday.

Since May, the yuan has fallen 759 basis points against the dollar to reach 6.3429 on July 25, according to the China Foreign Exchange Trading System.

"The Chinese stock market is attractive to foreign investors currently since the price level is relatively low," said Li Daxiao, director of research with Yingda Securities, Sunday.

"Foreign investors are optimistic about China's economic growth and the A-share market, where many of the country's most outstanding companies are listed," Li noted.

The Shanghai Composite Index declined to 2,132 points Tuesday, the lowest level in three years. The index continued to fall till Friday, when the announcement of the new regulation resurrected the market, which edged up 2.76 points to close at 2,128.76 points.

"The new rules shored up confidence in the capital market," Li said.

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