BEIJING, Dec 17 (Reuters) - China International Capital Corp. (CICC), a broker co-owned by Morgan Stanley (MS.N), has won a license allowing it invest $5 billion in client money abroad, a state newspaper reported on Monday.
Under the Qualified Domestic Institutional Investor scheme, or QDII, brokers and mutual funds can invest customers’ funds in stocks and a range of fixed-income products in 33 countries that have agreements with China’s securities regulator.
The move would bring the total number of such quotas to four brokers, including CICC, CITIC Securities, Guotai Junan Securities, and China Merchants Securities, to $20 billion, Sun Lujun, a senior official from State Administration of Foreign Exchange (SAFE) told the China Securities Journal.
SAFE, China’s currency regulator, said it had also granted a $42.2 billion quota to other institutions that are not brokers. The allowance breaks down into $16.1 billion for 21 banks, $19.5 billion for 5 mutual funds and $6.57 billion for 14 insurers.
Beijing used to restrict banks to fixed-income investments, but relaxed the rules earlier this year to allow them to buy stocks in countries that have agreements with China.
So far, only Hong Kong has done so, though authorities have said the scheme will soon be expanded to markets including London, New York, Frankfurt and Singapore.
Beijing launched the the QDII scheme in April 2006 to help ease upward pressure on the yuan by prompting capital outflows.
The scheme had initially received a lukewarm reception as investors prefered to keep their money at home to benefit from a booming stock market and rising currency.
SAFE’s latest figures show that only $10.86 billion of QDII money had been invested overseas by the end of September.
But Sun said QDII had prompted an increased outflow of capital and that $28.6 billion had been invested abroad by the end of October.
JPMorgan estimates about $90 billion of QDII funds will come from China by the end of 2008, half from asset managers, $25 billion from insurers, $15 billion from banks and $5 billion from securities houses. (Reporting by Eadie Chen, editing by Jan Dahinten)