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China sets investment limits on stock
By Alex Frew McMillan
HONG KONG, China (CNN) -- Chinese regulators said Friday they will allow overseas institutions to invest between $50 million and $800 million in its domestic shares. China will open up its A shares, previously off-limits to all but Chinese investors, to select institutions on December 1. Investors will also have to keep their capital in China for at least one to three years, depending on the type of institution, the State Administration of Foreign Exchange ruled. China announced it would allow overseas institutions into its $500 billion A share market earlier this month. International investors have until now only been able to buy B shares in around 100 companies. (Full story) Only the largest need applyThe institutions will have to be "Qualified Foreign Institutional Investors," or QFII, and China is ensuring only the largest players get in. Banks, for instance, will have to rank in the top 100 in the world and have more than $10 billion in securities under management. There are also limits on how much stock the institutions can buy, with overseas investors unable to buy more than 20 percent of a company's stock and no one investor allowed to buy more than 10 percent. Now China has stipulated the amount an overseas bank, insurer or fund manager can invest, in a special account for securities trading. The minimum time limits on investment aims to cut down on short-term instability and capital flight. Each approved investor will be required to submit to an examination of its operations every April. Market watchers do not expect a heavy flow of money into the A shares when they open in two days. But investors have welcomed the easing of restrictions, with further easing possible as the experimental program progresses. The Shanghai A share market is up 0.38 percent on Friday morning, in line with a small rally rippling through Asia, while Shenzhen is ahead 0.65 percent.
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