BIZCHINA / Top Biz News
Foreign currency to be invested abroad
By Zhang Ran (China Daily)
Updated: 2006-07-25 08:48
Securities firms are likely to be able to invest privately held hard
foreign currency abroad under a new government rule.
The new rule, which the government began public consultation on
yesterday, should encourage capital outflow and reduce pressure for the
yuan to appreciate.
"Securities firms can set out an asset management plan to raise tradable
foreign currency domestically and invest it in financial products
abroad," says the draft rule, released yesterday by the China Securities
Regulatory Commission (CSRC).
The rule has been posted on the regulator's website and public opinion
will be sought until July 31.
"The rule will create diverse investment opportunities for domestic
capital. Instead of being limited to the Chinese market, investors can
now buy into international markets," said Li Yongsen, professor with
Renmin University of China. "It will increase investors' investment
portfolios and diminish risks."
"Hong Kong will be the first targeted market for domestic brokerages, due
to its close connection with the mainland," said Jiang Jianrong, an
analyst with Shanghai-based Shenyin Wanguo Securities.
The rule, while bringing brokerages more business, will also be a new
challenge for securities firms, as domestic firms will have to
familiarize themselves with the overseas market, in which many of them
lack experience.
"Leading firms such as China International Capital Co Ltd and CITIC
Securities will have an advantage in such business, as they have some
overseas experience," said Li.
Besides allowing brokerages to raise funds for overseas investment, the
draft rule also includes regulations for brokerages' asset management
business.
"Brokerages can set out asset management plans to invest in stocks, bonds
market and funds," the draft rule says.
"Asset management is actually a private equity activity, as brokerages
are banned from advertising for clients through mass media," said Jiang,
adding that the rule will be the country's first regulation on private
equity activities.
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