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Brokers may be allowed to use pooled funds to trade overseas

(Shanghai Daily)
Updated: 2007-02-27 15:14

Brokers may be able to pool money of citizens to trade overseas stocks under new rules Chinese authorities are considering as they aim to channel domestic savings to other investments, sources said yesterday.

Securities houses may also be able to manage assets for retail investors under the rules, set to debut as early as March, which will enable the brokers to diversify their revenue stream, people familiar with the issue said.

The China Securities Regulatory Commission (CSRC) is seeking opinions among brokerages on the rules and may finalize them in coming weeks, the sources said.

"The rules will enable brokerages to join a batch of lenders, fund managers and insurers in helping clients invest overseas," said a Shanghai-based broking executive. "Second-tier players are also scheduled to be included in the asset-management business."

Sources said early last month that several major brokerages, including CITIC Securities Co and China International Capital Corp, have applied to CSRC to join the qualified domestic institutional investor scheme.

The stock watchdog will vet brokers' applications on a case-by-case basis and may pick firms of impeccable quality to test the program, the sources said.

Initially, brokerages will only accept foreign-currency capital from domestic investors to invest in overseas shares, the sources said.

Later, they will likely be permitted to convert local currency for such investment abroad, they said.

The rules will also benefit more than 30 second-tier brokers as they will be allowed to join about 20 first-level rivals to manage investors' funds on a collective basis, the sources said.

China started a campaign in 2005 to let select brokerages raise funds from individual investors and help them invest the money in local stocks and bonds.

The stock market regulator intends to complete an industry revamp by the end of August to shore up the capital sector's competitiveness. The move is set to slash the number of Chinese brokers by more than half to about 50.