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Funds and brokers to benefit from new rules

(Shanghai Daily)
Updated: 2007-06-21 08:52

China's stock regulator said yesterday it will allow, under new rules, fund managers and brokers to invest clients' capital in overseas securities in a bid to expand the business now dominated by banks.

Qualified fund firms should operate for at least two years and have net assets of at least 200 million yuan (US$26.2 million), the China Securities Regulatory Commission said in rules on its Website.

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C lient capital under management at these fund ventures must have amounted to not less than 20 billion yuan by the end of the last quarter, according to the rules, which will take effect on July 5.

Brokers can apply to do the business if they have a minimum 800 million yuan in net capital, which should account for at least 70 percent of net assets, the rules said.

Potential brokerages should also have operated an asset-management business for at least one year and with clients' funds worth two billion yuan under management by the end of last quarter, according to the rules.

China last year launched a Qualified Domestic Institutional Investor, or QDII, scheme which enables its financial institutions to help investors trade stocks abroad in a move to slow growth in foreign-exchange reserves.

So far quotas of nearly US$14 billion of QDII investment have been granted to commercial banks on China's mainland. Hua An Fund Management Co, partnering Lehman Brothers, is the only fund company in the QDII scheme with a US$500 million quota after receiving a special state approval.

"It (the move) will largely boost the scale of the QDII program and will certainly add a new revenue channel to brokers and funds," said Wu Ke, a Zhongtian Investment Consulting Co analyst. "The move will also in the long term help ease liquidity pressures on the domestic market."

Fund firms and brokers can pool domestic investors' yuan or foreign-currency capital for the QDII project, yesterday's rules said.

The initial size of a QDII product launched by a fund manager should not be smaller than 200 million yuan while a broker should pool at least 100 million yuan, according to the rules.

The QDII products are allowed to be invested in overseas money-market tools, stocks, bonds, asset-backed securities, real-estate investment trusts, mutual funds, structural products as well as financial derivatives, the rules said.