CSRC relax the restrictions on QFII in several aspects
At a meeting attended by custodian banks for QFIIs held on 10 May 2012, a senior official of the China Securities Regulatory Commission (CSRC) announced that the CSRC would relax the restrictions on QFIIs’ investment in the China market in the following respects:
- different subsidiaries in one financial group will be permitted to apply for QFII licence separately;
- QFIIs that have issued structural products will be permitted to apply for an additional quota, which must not be used to issue structural products; and
- limitations on the asset allocation of QFIIs will be relaxed, i.e. the 50 per cent threshold for equity investment will no longer exist but the 20 per cent cap for cash still remains.
The CSRC is also contemplating amending the current QFII regulations to relax further the qualification requirements and investment restrictions on QFIIs to attract more foreign institutional investors to invest in the China capital market. In accordance with the draft new regulations released by the CSRC in June 2012, the key amendments will be as follows:
- the qualification requirements for foreign institutional investors are greatly relaxed. For example, in terms of asset management entities, insurance companies and other institutional investors (annuities, sovereign wealth funds, etc), the requirements regarding the operational term are changed from five years to two years and the requirements regarding the securities assets managed are changed from US$ 5 billion to US$ 500 million;
- the QFIIs are permitted to open separate securities trading accounts for their own funds and the clients’ funds managed;
- the QFIIs are permitted to invest in bonds that are traded at the inter-bank bond market in addition to existing permitted investment scope; and
- the maximum shares held by all QFIIs in one listed company are lifted from 20 per cent to 30 per cent of the total shares of such listed company.
The lessening of the restrictions on QFIIs is a reflection of the efforts of the Chinese regulators to promote the QFII’s contribution in the China capital market. Offshore pension funds, generally long term investors, are particularly welcomed. According to the market news, the CSRC is even likely to grant special approvals that are currently believed to be outside the current QFII legal regime to pension funds from Hong Kong, Taiwan and Singapore, if the qualification requirements and quota for QFIIs cannot meet the needs of such offshore pension funds.
For further information, please contact Lynn Yang or Tony Zhong in Shanghai.
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