By Li Zengxin (chinadaily.com.cn)
Updated: 2007-08-23 16:32

In order to address the excess liquidity problem, the country has taken a series of measures to divert some of the capital to the peripheral markets.

As the latest move, the foreign exchange authorities this week announced a pilot program in the Tianjin Binhai Area where individual investors can buy Hong Kong stocks without previous forex limits. Bank of China (BOC) Tianjin Branch said yesterday that it has received thousands of phone calls and visits by investors inquiring about the new business.

The H-share business at BOC Tianjin will charge investors a stamp tax of 0.1 percent and commission of 0.25 percent. Although there may be a slight loss from the currency exchange between renminbi and Hong Kong dollars, as the yuan is appreciating, the 0.1 percent stamp tax, one third of the domestic rate, makes investing in Hong Kong attractive, said analysts.

For those outside the Binhai Area, they get the chance to invest overseas indirectly via the qualified domestic institutional investor (QDII) scheme. The securities regulator stepped forward to expand the scope of the participants in the program from commercial banks and mutual fund managers to securities brokers.

China International Capital Corp said yesterday it was approved by the watchdog to become the first securities broker QDII. And sources said other securities houses including Everbright, China Merchants and CITIC have queued up for the qualification.

Compared with bank and mutual fund QDII products, the broker QDII products may have advantages such as smaller minimum investment requirement, shorter lockup period, and a larger proportion of investment on stocks in the portfolio.

The US subprime mortgage crisis has made some Chinese investors doubtful of the safety and profitability of bank QDII products, although only one bank announced it might incur loss in its QDII products from the subprime markets. The expansion of the QDII program, said analysts, help clear the doubts and regain investor confidence in such products.

The country also sped up the preparation of its first financial futures. The China Securities Regulatory Commission last week approved 70 futures companies to trade in index futures, Shanghai Securities News reported yesterday.

Capital Futures Co, Jiangsu Holly Futures Brokerage Co, and Sinosteel Futures Brokerage Co received approval last week. The rest of the brokers will receive their documents within two weeks, the report said.

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