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Wednesday, 17 June 2009
QFII funds turn cautious after market surge
Foreign institutional investors did not open a single new brokerage account on the mainland’s stock exchanges last month, according to China Securities Depository and Clearing.
Foreign institutional investors did not open a single new brokerage account on the mainland’s stock exchanges last month, according to China Securities Depository and Clearing.
The cautious stance by overseas investors sends a signal that the A-share market is overvalued after a 52.5 per cent rally this year.
It was the first time since October last year that qualified foreign institutional investors (QFII) failed to open a new account in a monthly period.
In the first four months of the year, qualified foreign investors set up a combined 208 new accounts amid the bull run.
“QFIIs are not as active as they have been in the previous months,” said Xav Feng, the head of China and Taiwan research with Lipper.
“In the short term, QFIIs will adopt a conservative strategy on the market due to the high valuations.”
There are mounting worries among analysts and investors that the A-share market will stage a correction soon after hefty gains this year.
The mainland equity market was driven up by an influx of fresh capital this year after plunging 65.4 per cent last year.
The Shanghai Composite Index closed at 2,776.02 points yesterday, still 54.4 per cent off the peak set in mid-October 2007.
Beijing embarked on the QFII scheme in 2003, hoping foreign institutions would add stability and heft to the volatile market.
To date, Beijing has approved 82 foreign institutional investors that are viewed as astute in sniffing out market directions. According to Lipper, some of the QFII funds saw net redemptions last month as foreign investors started to feel uneasy about the high valuations and expected the market to go downhill in the coming months.
“The market has been overvalued by up to 15 per cent,” said Guotai Junan analyst Zhang Kun.
“But the mainland has been a speculators’ market for the past decade. No one knows whether the upward momentum will continue.”
Beijing tripled the QFII quota from US$10 billion to US$30 billion last year, widening foreign institutions’ access to the A-share market.
To date, more than half of the quota has not been used.
This year, the China Securities Regulatory Commission gave the green light to seven new foreign institutions, allowing them to buy yuan-denominated A shares.
Analysts said the regulator would speed up QFII approvals in the coming months to encourage stock purchases.
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QFII funds turn cautious after market surge
Daniel Ren in Shanghai
17 June 2009
Foreign institutional investors did not open a single new brokerage account on the mainland’s stock exchanges last month, according to China Securities Depository and Clearing.
The cautious stance by overseas investors sends a signal that the A-share market is overvalued after a 52.5 per cent rally this year.
It was the first time since October last year that qualified foreign institutional investors (QFII) failed to open a new account in a monthly period.
In the first four months of the year, qualified foreign investors set up a combined 208 new accounts amid the bull run.
“QFIIs are not as active as they have been in the previous months,” said Xav Feng, the head of China and Taiwan research with Lipper.
“In the short term, QFIIs will adopt a conservative strategy on the market due to the high valuations.”
There are mounting worries among analysts and investors that the A-share market will stage a correction soon after hefty gains this year.
The mainland equity market was driven up by an influx of fresh capital this year after plunging 65.4 per cent last year.
The Shanghai Composite Index closed at 2,776.02 points yesterday, still 54.4 per cent off the peak set in mid-October 2007.
Beijing embarked on the QFII scheme in 2003, hoping foreign institutions would add stability and heft to the volatile market.
To date, Beijing has approved 82 foreign institutional investors that are viewed as astute in sniffing out market directions. According to Lipper, some of the QFII funds saw net redemptions last month as foreign investors started to feel uneasy about the high valuations and expected the market to go downhill in the coming months.
“The market has been overvalued by up to 15 per cent,” said Guotai Junan analyst Zhang Kun.
“But the mainland has been a speculators’ market for the past decade. No one knows whether the upward momentum will continue.”
Beijing tripled the QFII quota from US$10 billion to US$30 billion last year, widening foreign institutions’ access to the A-share market.
To date, more than half of the quota has not been used.
This year, the China Securities Regulatory Commission gave the green light to seven new foreign institutions, allowing them to buy yuan-denominated A shares.
Analysts said the regulator would speed up QFII approvals in the coming months to encourage stock purchases.
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