Chinese Mandarin - Mainland to impose HK investment quota

?  ?

BIZCHINA / Center

Mainland to impose HK investment quota

(Agencies)
Updated: 2007-09-21 13:31

The Chinese mainland?is to impose a quota on investments on the Hong Kong
stock market, which will reduce capital outflows to a fraction of the
US$100 billion-plus forecast when its outward investment scheme was
announced last month.

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC),
said there would be no limit on individuals. But he said there would be
tight controls on the total amount.

Special Coverage:
Markets Watch??

Related readings:
?Stock pilot program to start in a week
?HK to benefit from pilot investment scheme
?China prepares for residents' direct investment in HK shares

Liu said there would be a "quota in general" and when that was reached,
the State Administration of Foreign Exchange (SAFE) would reassess market
activity.

"They can lift and readjust the quota if necessary and appropriate –
it's a flexible ceiling," he told the Financial Times.

It was the first mention from?China's financial authority?of a quota on
its plan to allow individuals to invest in foreign stocks. Chinese
officials refused to disclose the level of the quota but it is reckoned
to be lower than the amount of investment expected by the Hong Kong
market, which has soared in anticipation of a flood of?money from the
Chinese mainland.

The benchmark Hang Seng Index has risen 26 percent since the SAFE
announcement.

The new scheme, known as the "through-train to Hong Kong stocks" was
announced by SAFE on August 20 and required investors to open trading
accounts with Bank of China's (BOC)?branch in the?northern city of
Tianjin.

SAFE said investors would be allowed to open accounts from any BOC outlet
in the country and buy an unlimited amount of foreign exchange for the
purpose. But the scheme has been delayed by disagreement between SAFE,
CBRC, the central bank and the securities regulator.

The central bank's focus is on draining liquidity from the economy and
making the currency more flexible. The securities regulator wants to
avoid extensive overseas investment that could damage the booming
domestic stock market, which most analysts regard as overpriced.

Jing Ulrich, chairman of China equities at JPMorgan, said the government
was considering restricting the plan to residents of the big cities of
Tianjin, Shanghai, Beijing and Shenzhen.

Mr Liu said: "We are supportive (of the scheme) but we are carefully
looking at those banks who are channelling public funds to invest in Hong
Kong stocks or via Hong Kong to invest in other markets to make sure they
have a sound and solid risk control system. They must show me
satisfactory answers before they can do the 'train to Hong Kong stocks'."

(For more biz stories, please visit Industry Updates)

Learn Chinese, Chinese Mandarin