Thirty times greater than the $1 billion originally planned

TAIPEI: Mainland-based qualified domestic institutional investors (QDIIs) will be allowed to invest up to an estimated $30 billion (NT$968 billion) in Taiwan's stock market, 30 times more than was originally anticipated, the island's top financial regulator said yesterday.

Financial Supervisory Commission Chairman Sean Chen said the FSC will allow QDII funds approved by the Beijing-based Securities Regulatory Commission (CSRC), which have a combined investment quota of about $30 billion, to invest in Taiwan once a memorandum of understanding (MOU) on financial regulatory cooperation between the two countries takes effect January 16.

Just over one month ago, Chen said mainland QDIIs would be allowed to invest up to 10 percent of their estimated $10 billion in assets, or about NT$30 billion, in Taiwan's market.

The mainland's securities regulator later told the FSC, however, that it would not impose the 10 percent maximum investment limit on investments in Taiwan's stock market, enabling the entire $30 billion quota to theoretically be injected into Taiwan, according to FSC officials.

Chen said the FSC will discuss with other agencies and Taiwan's central bank whether to impose any upper limit on total QDII investment in the local bourse.

"We will set an upper limit for total investment (for the QDIIs) in the local stock market and for individual companies," Chen said, while responding to questions from reporters following a legislative committee meeting.

Chen did not mention, however, whether the FSC will eventually allow mainland QDIIs under a different regulatory regime - those approved by the China Banking Regulatory Commission (CBRC) - with a total investment quota of about $7.9 billion, to invest in the Taipei stock market.

Under the MOU, which was signed November 17 and was to take effect within 60 days, Taiwan and the mainland will also work together to exchange and protect the confidentiality of information, establish a mechanism to deal with possible financial crises, and conduct financial examinations, according to the FSC.

Under existing regulations on the mainland, QDIIs are allowed to invest only up to 3 percent of their assets in public and corporate bonds in regions that have not signed an MOU with Beijing.

Twelve fund management and securities companies on the mainland have been granted QDII licenses, though they are only operating nine funds so far.

As of the end of August, the State Administration of Foreign Exchange (SAFE) in Beijing had granted these QDIIs a combined investment quota of $33.57 billion, and a total investment of $14.5 billion has already been made in overseas markets, according to SAFE statistics.

In the first three quarters of this year, the nine QDII funds rose an average of 43.4 percent, statistics show.

Analysts said increased investment from QDIIs is definitely a bullish factor for the local stock market in the medium to long term, and they expect leading electronics issues to benefit the most from mainland QDII investment.

China Daily/CNA

(HK Edition 12/29/2009 page2)