China has increased the amount Hong Kong’s central bank can invest in Chinese securities to $1 billion from $300 million, a the city’s monetary authority said on Thursday.
The move marks the latest in a series of reforms to the Qualified Foreign Institutional Investor (QFII) programme, which was created in 2003 to allow foreign investment in Chinese securities.
A spokesman for the Hong Kong Monetary Authority, the de facto central bank, said the initial quota of $300 million had already been used to invest in yuan bonds and equities.
He did not say when approval for the increase in the quota was granted.
China increased the quota for the overall QFII programme from $30 billion to $80 billion earlier in the year, and accelerated the pace of quota approvals for programme participants in June.
Regulators have also opened up alternative channels for investment into the mainland, including allowing foreign central banks to invest directly in the onshore bond market.
Policymakers are struggling to support domestic growth and stock market, without reverting to the kind of monetary easing it implemented in 2009 in response to the global financial crisis, which has been blamed for creating asset bubbles and industrial overcapacity.
Chinese authorities also launched a yuan-denominated programme – known as RQFII – and approved the creation of exchange-traded funds (ETFs) tracking onshore stock indices in late June, which will be traded through the RQFII programme.
The mainland securities regulator is also considering allowing Hong Kong pension funds to invest in China’s capital markets through a special channel.
China’s foreign exchange regulator granted $1.4 billion in combined quotas to overseas investors during the first half of June, almost equal to the amount given in the previous two months.
But a slumping yuan exchange rate against the US dollar – to which Hong Kong dollar is pegged – appears to have deterred some investors who had based their strategies on an assumption of yuan appreciation.
The RQFII programme has struggled with fundraising and marketing channels, and sovereign appetite for yuan-denominated assets is difficult to assess.
The QFII programme, however, is denominated in dollars, not yuan.
Category: Hong Kong