QFII market has great potential: UBS

There is room left for the QFII and RQFII markets to expand in 2013, Xia Yang, head of China equities at UBS Securities, said on Jan 18.

By the end of November 2012, 201 Qualified Foreign Institutional Investors, or QFIIs, had been approved with a total investment quota of $36.04 billion.

The total QFII quota ceiling has been increased to $80 billion.

The QFII program allows foreign investors to buy and sell yuan-denominated A-shares on the mainland's stock exchanges.

China is looking forward to more overseas investment in A-shares, particularly from pension funds, sovereign wealth funds, government investment institutions and endowments, which are growing quite fast but still account for a small part of total QFII investors.

"The current market sentiment is still quite positive, and QFII clients are becoming more active in the A-share market, as the QFII market is opening up with a higher quota ceiling and lower entrance requirements," said Xia.

The Renminbi Qualified Foreign Institutional Investors, or RQFII, program started at the end of 2011, grew quite fast in the last two years with the RQFII quota limit lifted from 70 billion yuan to 270 billion yuan in 2012.

The first RQFII quota of 20 billion yuan was approved in 2011, and the second quota of 28 billion yuan was approved in 2012.

"The expansion of the RQFII market will continue to welcome more overseas investors, encouraged by the State Administration of Foreign Exchange with looser policies," said Xia.