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The qualified foreign institutional investors (QFII), having positive impressions upon the ongoing split share reform, are fully confident about the long-time performance of Chinese A-share market, a manager with the Swiss-based investment bank UBS told the Securities Times newspaper on Wednesday.
Yuan Shuqin, general manager in charge of the Chinese securities department of the UBS, said about 60 percent of the company's investment in China is put into China's A-share stock market, 20 to 30 percent into tradable debts and 10 percent into Funds.
Less than 10 percent of the total fund has been used to buy T-bonds, Yuan said.
China did not open its capital markets to foreign institutional investors until 2003. A total of 27 QFIIs, including UBS, DeutscheBank, Normura Securities, and Citigroup Global Markets Limited, have been allowed to engage in the securities business on the A-share market, China's domestic securities market, since the middle of 2003.
Some QFIIs, wishing to earn profit from Renminbi's possible appreciation in the near future, reportedly have made little real investment in the country.
The UBS has almost used all the newly-added quota of 400 million US dollars, Yuan said. "Our clients' demand for additional quota is huge, so UBS has asked the State Administration of Foreign Exchange (SAFE) to give another 300 to 500 million US dollars of investment quotas."
UBS was approved the first QFII by the China Securities Regulatory Commission (CSRC) on May 26, 2003 and made its first deal on China's domestic stock market through buying four A-shares including Baoshan Iron & Steel, Shanghai Port Container, SinotransAir and ZTE Corp..
When UBS firstly entered the Chinese stock market in 2003, the indexes were dropping all the time, and now the market performance has not turned better, Yuan said.
"The market is still influenced greatly by the policy," she admitted, noting UBS' clients adhere to their own principle of choosing stocks on the basis of listed companies' real value.
The confidence of individual investors in A-share market has been severely frustrated by the four-year downturn trend, and some new institutional investors lack investment experiences, so the new policies promulgated by securities watchdogs are never enough to invigorate the stock market, she said.
The scale of QFII, a good potential incentive to push forward the Chinese securities market's development, should be expanded with more additional quotas granted, she said.
UBS' maximum daily turnover accounted for 3 to 4 percent of the total turnover in the Shanghai Stock Exchange, and in most time, its turnover equals to 0.5 percent of the total turnover, said she.
After years of fierce debate, China last month began an experiment to tackle one of the major problems blamed for its sluggish stock markets -- the split share structure, which refers to the existence of a large volume of non-tradable state-owned and legal personal shares. The reform plan, aiming to make all shares tradable, has caused drastic fluctuations of composite indexes recently.
Yuan, hoping the QFII system will be more transparent and stable, expressed wish that QFIIs would be allowed to buy corporate bonds in the future.
(Xinhua News Agency June 23, 2005)
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