To Entice Foreign Capital, China Relaxes Regulations

Although still miniscule in nature, the Chinese Qualified Foreign Investor (QFII) program will—if proposed regulation passes—raise limits, lower minimums, and reduce lockups for foreign institutions, a sign of encouragement for foreigners wishing to pour money into the country.

(September 9, 2009) – In a move signaling an increased willingness to let foreign institutional investors play in domestic markets, China has relaxed quotas and lowered lockup times for foreign investors.

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Draft regulations released last Friday include a provision that would raise the maximum individual contribution for QFIIs from $800 million to $1 billion, according to Reuters. Also included in the proposal would be a lowering of the minimum investment from $50 million to $20 million, and a relaxation of lockup periods from one year to three months. However, the overall limit of $30 billion placed on QFIIs still remains at $30 billion, a relatively small sum compared to the market capitalization of more than $3 trillion.


The QFII program, launched in 2002, allows designated foreign investors—including Yale University, Singapore sovereign wealth fund Temasek, the Bill and Melinda Gates Foundation, and numerous American banks—to purchase and sell shares in the Chinese public markets. As of February, a total of 79 foreign investors had been approved under the program.


The move comes after the Chinese stock market fell 22% in August; some pundits see this as a measure, at least symbolically, to both stabilize the domestic market and aid QFII investors.


“Most QFIIs are now brokers using funds they have raised to invest in China,” Wu Haijun of Power Pacific Corp of Canada—the QFII participant for Power Corporation of Canada—told Reuters. “Funding channels for those brokers are not always stable. Some may not be able to assume the role of stabilizer in case of market volatility. By lowering the minimum quota requirements and other steps, China apparently hopes to diversify QFII investors.”



To contact the <em>aiCIO</em> editor of this story: Application Administrator at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

For World’s Pensions, Asia Sees Growth while America Falters

Asian pension funds (including Australia) gained 19% in the past five years, according to a study by Watson Wyatt; North American funds, on the other hand, returned just 4%.

 

(September 10, 2009) – Asian and Australian pension funds have vastly outperformed their American brethren in recent years, a new study shows.

 


According to a Watson Wyatt/P&I report, the Asia Pacific region—which includes the mighty Australian super funds—has appreciated 19% over the past five years. This figure significantly outdoes the 4% return by North American funds over the same time frame. These growth returns take into account contributions from plan sponsors and investment returns.

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The survey—which looks at the 300 largest pension funds globally—also indicates that larger funds did better, on average, than smaller ones. While the average pension plan in the survey lost 12.6% overall in 2008, the largest funds—those in the top 20—only lost 4.1% on average. This had the effect of seeing the 20 largest funds increase their share of total assets from 36.5% to 40.6%. Funds that fell out of this top 20 included both the Ontario Teachers’ Pension Plan and the Canada Pension Plan (which lost 34% and 30%, respectively), as well as American-based AT&T (-23.8%) and New York State Teachers’ (-16.6%). Taking their place were Denmark’s ATP, Japan’s National Public Service Fund, and the provident funds of both Singapore and Malaysia.   

 


While the growing prominence of Asian and European funds may signal a shift in global asset-owner power, America, despite poor recent returns, still holds a near-majority of pension fund assets (40%, down from 43% in 2007).



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

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