Qatar Seeks $5 Billion China QFII Quota - Businessweek

Qatar’s sovereign wealth fund is applying for a license and a $5 billion quota to invest in China under the nation’s Qualified Foreign Institutional Investor program, the China Securities Journal said on its website, citing Energy and Industry Minister Mohammed Bin Saleh al-Sada.

Qatar will allocate the funds mainly for the domestic A- share equity market and initial public offerings, with some investment in bonds, al-Sada said in Beijing, according to a separate report by the Xinhua News Agency said. The decision was made based on Qatar’s confidence in China’s long-term growth potential, Xinhua cited the minister as saying.

Central banks, sovereign wealth funds and financial institutions are looking to China to diversify their assets as Europe’s debt crisis roils financial markets. China said this month it will lower the entry barrier for foreigners seeking to invest in the nation’s capital markets under the QFII program after more than doubling the total quota to $80 billion in April.

Introducing more long-term overseas funds will help improve confidence, promote stable growth in China’s capital markets and provide “robust” returns to domestic investors, the China Securities Regulatory Commission said in May.

The commission said on June 20 it plans to cut the minimum requirement for assets under management to $500 million from $5 billion for companies seeking a QFII license. It will also allow them to invest in the country’s interbank bond market.

Investment Quota

The CSRC will complete the license approval for the Qatar Investment Authority as soon as possible and “actively assist” it in obtaining an investment quota, the China Securities Journal said, citing unnamed officials from the regulator. The newspaper said al-Sada was in Beijing for a China-Qatar investment and cooperation meeting.

The State Administration of Foreign Exchange decides on the amount of foreign-currency funds an institution can invest. It said last month it will speed up the approval process.

Guo Shuqing, the commission’s head, is spurring efforts to give the nation’s bond market a bigger role in financing growth and help divert risk from the state-owned banking system that provides 75 percent of the nation’s credit.

The Shanghai Composite Index, the nation’s benchmark stock gauge, fell to its lowest level in three months on June 21 on concern the nation’s economic growth is slowing. The index has dropped 8 percent since this year’s closing high on March 2.

The Qatar sovereign wealth fund’s planned investment would exceed the current limit of $1 billion per single foreign investor allowed under the QFII program, according to Xinhua and the China Securities Journal.

Quota Increase

Bank of Korea, the Kuwait Investment Authority and the Monetary Authority of Singapore are among the 172 entities granted QFII licenses since the program was introduced in 2002 to allow foreign institutions to buy and sell yuan-denominated securities. Of the total, 145 have been awarded a combined quota of $27.26 billion, the CSRC said on June 20. The total amount allowed before April’s increase was $30 billion.

Singapore’s state-owned investment company Temasek Holdings Pte has already applied to increase its quota after the regulator’s April announcement, according to an e-mailed statement on June 14.

--Zheng Lifei, Yang Huiwen. Editors: Nerys Avery, Paul Gordon

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net; Huiwen Yang in Shanghai at hyang66@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net