qdii

Retail interest in QDII funds is being driven by an overpriced domestic stock market and a lack of investment options at home.

The QDII programme hit a wall during the financial crisis , and regulators placed it on hold for more than a year .

It did not appoint an overseas investment adviser when setting up its second QDII fund, HFT Greater China Equity, in December.

Efforts to recycle foreign reserves out of the country now appear to be concentrated on the QDII programme.

The scheme was launched a year ago to encourage greater capital outflows from the mainland.

Setting up a QFII or a QDII custodian requires two steps: qualifying as a custodian and applying for a business license.

Funds investing internationally under the QDII scheme have had a difficult birth.

Only institutions with a Qualified Domestic Institutional Investor quota can invest overseas for clients.

"The QDII programme is still in place, " Frank Gong, analyst at JPMorgan, said in a research note.

Before this, only mainland banks and selected fund managers were able to invest client money overseas under the QDII scheme.

QDII funds, meanwhile, have been problematic since they were first introduced.

Ms Ulrich notes that four qualified domestic institutional investor (QDII) funds have been launched with two more in the pipeline.

Article 34 A QDII shall open a custody account at the custodian for the custody of all the assets of a fund or pool plan.

However, he says QDII is still in its early stages in China and needs to be further developed and regulated.

However, due to global financial crisis and the Renminbi value increase, the QDII business in several commercial banks suffered big loss.

Mr Fung was referring to the qualified domestic institutional investor (QDII) scheme, which allows Chinese funds to invest overseas.

By then, the CSRC was upping allocations for overseas equities for qualified domestic institutional investors.

Equal treatment should be given to foreign banks and domestic banks with regards to QDII authorisation.

Although some QDII fund managers have decided to invest on their own, they are still working with their foreign partners in other areas.

He estimates that as many as 16 other domestic mutual funds are lining up for SAFE's QDII quota approval.

I expect the Chinese government could increase the quota on QDII investment to $90bn within the next year.

More financial institutions are expected to get licences to conduct QDII business soon, she notes.

Article 12 A QDII shall apply to the SAFE for the qualification for foreign exchange business in accordance with related provisions.

In 2006, Beijing paved the way by allowing individuals to invest overseas through the qualified domestic institutional investor program.

This year's QDII products have been more diversified compared with previous funds.

"QDII is an important product for Chinese investors to invest overseas, " says Mr Li.

As a result, regulators halted the scheme in 2008 and international managers have had little to cheer since.

The approval of more QDII quotas should drive market liquidity and help reduce the valuation gap between A and H shares.

As global financial markets improve, now is a good time for QDII managers to resume their launches, says Mr Liu.

Previously, the QDII quota was designated for overseas fixed income investments only.

Turning the QDII concept into profit is a challenge for managers of financial institutions.

Launches have increased gradually since January as global markets recover.

The statistical data show that too centralized asset allocation poses negative effect on gains of QDII funds.

QDII can help China link its financial market to the world and will facilitate the orderly outflow of founds from the mainland.

But the mechanics of QDII preclude stock selection; instead investors will have to buy funds or similar products sold by the banks.

In the past few months, Beijing has loosened investment restrictions for the QDII and included more participants.

Although some QDII fund managers believe they have the ability to invest on their own, market observers say they still need external advice.

and that QDII has the greatest impact on the expected return.

"More QDII will definitely bring more chances to foreign fund managers, " says Mr Liu.

"It is obvious that the CSRC is relaxing the regulations on QDII launches, " says Citic's Mr Liu.

The system was liberalised in 2006 with the aim of channelling part of China's $2, 000bn domestic savings overseas.

In October 2009, the State Administration for Foreign Exchange (Safe) resumed approval of QDII quotas after a 17-month moratorium.

"What has been delayed is the [through train] and not QDII. The Chinese wall of money still stands. "

'I'm a believer in the QDII scheme because there's a tremendous amount of mainland liquidity that needs to find a home, ' she says.

The operation time and investment area are two key factors that affect QDII's aggregate performance.

BNY Mellon Western is also planning to launch QDII products this year.

However, although the combined quotas now total about $18. 5bn there has been little interest from Chinese investors.

Chapter 5 Improvement of the foreign exchange management legal system of China.

In 2008, Beijing halted new QDII approvals, lifting the ban only last October.

Fund managers expect a QDII boom in the coming years.

The fund will come under China's QDII scheme and will passively track S&P's Bric 40 index.

Higher local deposit rates are likely to stymie the development of QDII further.

Meanwhile, programs such as QDII are leading to greater capital outflows.

As of May 2008, SAFE had approved 56 QDIIs with a total quota of $55. 95 billion in investments.

They can also pitch for sub-advisory QDII mandates from Chinese insurance companies.

I think China prefers other means such as QDII for capital outflow.

Among the 32 existing QDII funds in China, 23 have hired foreign advisers since their launch, according to data from 2Rich.

"QDII fund managers mostly invest in Hong Kong-listed Chinese companies that are most familiar to them, " he says.

Many investors were betting that Hong Kong shares, the main destination for QDII money, would continue to rise.

Meanwhile, QDII funds are taking a more global view of where to invest, meaning Hong Kong has more competition for the cash.

China Southern Management's fund will invest in 10 overseas equity markets, including the US, Japan, India and Hong Kong.

Handling the settlement, sales, collection and payment of foreign exchange as well as the Renminbi settlement business for the QDII;

QDII funds market will be the first choice of the Hong Kong stock market, especially Chinese stocks-stocks that will gradually benefit.

Risk Managing Strategy of Chinese Security Company to QDII Challenge

Study on the Present Condition and Existent Problems of QDII Business in Commercial Banks

Chapter 3 Analysis on the legal issues of QDII system operation pattern;

Analysis on the fund quotas and market impact of QDII

Joseph Yam on expansion of QDII schemes

Analysis of impact of QDII on stock market of China

A new QDII product launched by BOC

A Comparative Analysis on the First Batch of QDII Products in China