By Ding Qi (Chinadaily.com.cn)
Updated: 2007-08-08 08:39

The investment quota for Qualified Domestic Institutional Investors (QDII) will reach US$90 billion next year, but huge overseas investments won't dampen domestic markets, Li Jing, general manager and chairman of the Chinese securities department of JP Morgan Chase, told the China Securities Journal on Monday.

According to the estimation of JP Morgan, the 90-billion quota will come from banks, fund management companies, securities companies and insurers.

Related readings:  China unit of JPMorgan wins QDII nod  China AMC plans $1.3b QDII fund in Sept  China authorises 1st JV fund to invest overseas under QDII  Banks use only 26% of QDII quota in 1st half  ICBC raises $585m in China's largest QDII fund

Shares of mainland companies listed in the Hong Kong market will benefit more from the QDII funds in the short term. Stocks with large price discount from their A-share counterparts or possibility to return to the mainland market are particularly preferred. From a longer perspective, however, QDII will appoint experienced overseas fund managers to invest more in other markets, Li said.

She anticipated that with more QDII funds flowing out, and more Chinese firms launching IPOs in Hong Kong in the second half of the year, the price difference between A-shares and H-shares would gradually disappear.

Although the US sub prime loan crisis caused some fluctuations of the Asian market recently, Li did not believe it would affect the domestic market since few banks in China had invested in foreign credit loan products.

Instead, both the mainland and Hong Kong stock markets will continue to grow backed by the nation's economic development, according to Li.

The corporate revenue will keep growing, and huge funds are flowing from the banks to the stocks market, which may serve as driving force of the stock prices. Although a structural adjustment was needed currently to ensure a sustainable development, the upward trend of the nation's economy as well as the market would not change, she noted.