China has expanded its Qualified Domestic Institutional Investor (QDII) programme in a bid to encourage more domestic investors to look overseas. Under new rules that take effect July 5, mainland brokers and fund managers will be allowed to invest client funds in overseas fixed-income, equity and derivative securities.
Until now, only banks and insurance companies have been eligible for the QDII programme and they were saddled with a restrictive investment remit originally limited to low-risk investments like bonds.
Given the stellar performance of China's domestic equity markets, few mainland investors have felt much desire to invest in foreign markets, not least because of the appreciation of the yuan which would eats into the returns.
To make the scheme more attractive, the range of allowable foreign investments was recently expanded to include racier equities and derivatives– see this EngagingChina story.
The change seems to have helped increase the appeal of QDII to institutions, as we are now seeing new products launched on the mainland to cater for wealthy domestic investors.
For example, HSBC Bank (China) has just expanded its QDII offering by rolling out three funds.
The funds will be offered in eight cities and provide various types of investment for mainland citizens in Asian, European, US and other emerging markets, and include global bonds.
The bank said the new funds will require a minimum yuan investment equivalent to $30,000.
Two of the three funds will be managed by HSBC and one will be run by Merrill Lynch International Investment Funds.