China Securities Regulatory Commission
(CSRC), the country's equities market regulator, said on Friday there was no inflow or outflow on a massive scale of Qualified Foreign Institutional Investors (QFII) funds from the country's A-share market.
A CSRC official, who spoke on condition of anonymity, also said QFII funds were not involved in manipulating share prices and overseas institutions were still enthusiastic in applying for QFII licenses.
Through September, QFIIs numbered 69. Of them, 57 had used their quotas and each had an average capital of 200 million yuan (29.3 million U.S. dollars).
Stocks held by the 57 QFII funds accounted for only 2 percent of the total market value. The official said it was unnecessary to exaggerate their influence on the A-share stock market.
"Generally, investments made by QFII funds conform to norms. The inflow and outflow of foreign exchange conducted by QFII funds are controllable and related operations are normal and stable."
Since the QFII program was put into trial practice in November 2002, the CSRC and the State Administration of Foreign Exchange (SAFE) had taken a series of policies and measures, which helped set up an efficient supervision framework, he said.
An investor sits in front of a share price board in a trading hall in southwest China's Chongqing Municipality, on Oct. 17, 2008. The benchmark Shanghai Composite Index gained 1.08 percent to end at 1,930.65 points following a powerful rebound of PetroChina and Sinopec. The Shenzhen Component Index closed at 6,209.51 points, up 0.7 percent on Friday. [Xinhua Photo/Zhou Hengyi]
The QFIIs were still "significant institutional investors" and many overseas institutions were still trying to apply for QFII licenses though the A-shares had undergone massive adjustments this year, according to the official.
"The CSRC is supervising the QFII funds and their investment movement. Any abnormal or rule-breaking behaviors are under supervision," he said.
The QFII program was introduced by the CSRC and the People's Bank of China (the central bank) as a provision for foreign capital to access the country's financial markets. QFII funds are allowed to invest in Chinese shares, treasuries, convertible and enterprise bonds.
There were reports in the Chinese media claiming that a massive outflow of QFII funds was one reason behind the slump of the domestic stock market.
An investor watches a share price board in a trading hall in Lanzhou, capital of northwest China's Gansu Province, on Oct. 17, 2008. The benchmark Shanghai Composite Index gained 1.08 percent to end at 1,930.65 points following a powerful rebound of PetroChina and Sinopec. The Shenzhen Component Index closed at 6,209.51 points, up 0.7 percent on Friday. [Xinhua Photo/Han Chuanhao]
The benchmark Shanghai Composite Index, which closed at 1,930.65 points on Friday, had plunged more than 66 percent from its record high last October.
Also on Friday, the CSRC issued a guideline document on the setup and qualification of supervisors for QFII funds, in what the commission said was to help QFIIs improve their compliance with rules and norms.
The CSRC said the QFIIs were not required to appoint a dedicated supervisor. Instead, the supervisor could be held by a business operator concurrently, it said.
The guideline file also clarified the supervisor's duties, including submitting reports on QFII compliance with rules and norms, checking reports on products and industries and monitoring the disclosure of investment deals by the QFII.
The CSRC said the supervisor system was aimed to extend the regulatory and supervisory functions from the stock exchange into the QFIIs to prevent rule-breaking behavior.
Elsewhere, CSRC Chairman Shang Fulin said earlier in the day the body was making deep studies on changes and problems in the capital market and striving to keep it running stably.
Speaking at the second Sino-French financial forum, Shang said the CSRC had taken a slew of measures, including the decision to launch trial operations of margin trading service and improving the block-trading system to boost investor confidence in face of complicated and capricious market situations.
"The overall Chinese economic situation is good and the financial sector is operating stably. What remains unchanged is the basis which supports a stable and health development of the Chinese capital market."
The country's equities market regulator would continue opening the capital market in an orderly and steady manner and make every effort to keep it operating stably, Shang added.