QDII2 likely to target Hong Kong market

BEIJING -- China's planned Qualified Domestic Individual Investor program, or QDII2, may allow investors to buy securities products in the Hong Kong Exchanges and Clearing Ltd (HKEx), Friday's Shanghai Securities News reported.

China's central bank has decided to set up the QDII2 pilot program in southern Guangdong province, and is waiting for final approval from the State Council, the newspaper said.

The investment scheme will first target HKEx and then expand to other financial products in the Hong Kong market, and gradually to products in other parts of the world, according to a document obtained by the newspaper.

"Qualified" domestic individual investors should have 3-years experience in stock investment and financial assets equivalent to no less than 1.5 million yuan ($244,000), according to the document.

The lower and upper limits of a single individual investor for overseas investment are set at 500,000 yuan and 20 million yuan respectively, said the document.

To control risks, QDII2 funds should circulate in a closed-loop manner, said the document. The money goes abroad in a special account and all the returns should come back into the same account. It can not be transferred into another account, said the document.

Chinese investors will invest in overseas capital market through platforms jointly set up by domestic and overseas securities brokers.

Experts said the authorities chose Hong Kong as the first target market for the operation of the QDII2 scheme as Chinese securities brokers are more familiar with the market compared with others.

Currently, only institutional investors in China can invest in overseas capital markets, via the Qualified Domestic Institutional Investor program, or QDII1.