By Lin Guan (chinadaily.com.cn)
Updated: 2007-12-06 14:48

The securities regulator asked fund companies that apply for qualified domestic institutional investor (QDII) products to lower the proportion of Hong Kong stocks in their investment portfolios, Guangzhou Daily reported, citing an unidentified source.

These institutional investors were told to invest less in the Hong Kong stock market, which had been on a blistering rise but suffered an unprecedented drop of 1,526.02 points, or 5.01 percent, to end at 28,942.32 on Monday. State-owned enterprises (SOE) led the fall.

Related readings:  QDII funds in dilemma  QDII products totter as international stocks drop  China's QDII quota hits US$42.17b by end-September  Investors seek safety in QDII funds

The newspaper blamed the plunge on investors' worries about the postponement of the mainland's direct investment in the Hong Kong stock market and sell-off of SOE stocks.

The regulator had approved a QDII quota of US$42.17 billion by the end of September. Some US$16.1 billion of the quota went to the commercial banking sector, while US$19.5 billion went to five mutual fund companies and the remaining US$6.57 billion to 14 insurance firms. To date, institutional investors have made a total of US$10.86 billion worth of QDII investment.