Merrill Lynch granted QFII, more are expecting approval

Merrill Lynch got QFII status on May 9. For half a year before that, no such approval was given to any overseas institutions.

There are 13 qualified foreign investment institutions (QFII) including Merrill Lynch in China. 11 out of them have made a total investment of 1.7 billion USD. Insiders released that another scores of institutions were lining up for approval.

He Xianhong, who is in charge of China Studies of Merrill Lynch, said expectation of RMB appreciation was the immediate reason for investment in A shares by overseas institutional investors at the beginning of this year. But now, he argued, the situation has changed. Pressure on RMB appreciation has eased amid the prospect of interest rates increase in other countries including US. New QFII will become new source of investment in the securities market.

Analysts agreed it was the right time to introduce new QFII into the market when share prices in Shanghai and Shenzhen exchanges were all down. It is expected another billions of dollars will be injected into the market.

However, the expectation of RMB appreciation is not a main incentive to overseas institutional investors to make decisions on A shares investment. Their strong interest in China¡¯s capital market is actually based on their belief in China as the fastest-growing economy in the next few years in the world.

¡° Overseas institutional investors do not easily change their strategies just because of market fluctuation. Their idea is long-term investment. This will help rational development of the market. And domestic listed companies will face higher requirements at the same time.¡±Wang Zhonghe, chief representative of Merrill Lynch¡¯s office in Beijing, told the reporter.

A Merrill Lynch¡¯s team established last August with members in Shanghai and Hong Kong will work out its report on A share market. He said it was just the beginning of their watch on A share market. ¡° QFII brings different measurements and pricing techniques for value. This will help China¡¯s domestic capital market integrate into the international market.¡± He said.

He also expressed Merrill Lynch¡¯s confidence in soft landing of China¡¯s economy, which they believe would still be one of the fastest growing economies in the next few years in the world. Many overseas institutional investors are looking for the right time to enter in the Chinese market.

Yuan Shuqin, an executive of China Securities of UBS, said July 9 last year when China¡¯s A share market welcomed the first QFII order that overseas institutional investors would not care so much about short-time market fluctuation as about the future prospect of a share.

The continual and rising QFII boom represents overseas institutional investors¡¯ strong confidence and interest in China¡¯s A share market which have long sustained and will sustain in the time to follow.

By People's Daily Online