FSC to set overall cap on Chinese QDIIs

Lee Chi-hsien, director general of the Securities and Futures Bureau of the FSC, made the remarks after the China Securities Regulatory Commission (CSRC) sent a letter to the FSC, to the effect that there will be no overall ceiling limit on investments by China's QDIIs in Taiwan's stock market from Jan. 15 on, when the memorandum of understanding (MOU) on cross-strait cooperation in financial supervision.

The letter, in reply to an inquiry of the FSC, clearly denied allegations that China's QDIIs would not be allowed by the CSRC to invest more than 10 percent of their funds in the Taiwan stock exchange market, but confirmed a 10 percent ceiling for stakes owned by QDIIs in any individual share listed on the local bourse.

Accordingly, maximum investment amounts by QDIIs in Taiwanese stocks may be much higher than the original expectations among local investors, which ranged from NT$37-100 billion.

In order to mitigate the impact of the likely large-scale investments by Chinese QDIIs on the local bourse, the FSC has decided to set an overall ceiling limit on investments by QDIIs in Taiwan stock market before the financial MOU takes effect on Jan. 15, 2010, the FSC's Lee said.

The FSC will consult with the CBC concerning how to set the overall ceiling limit on investments by Chinese QDIIs on the local bourse, and work out maximum investment ratio for QDIIs in individual shares of some specific industries such as banking, display panels and semiconductors, Lee continued.

Lee also stressed that applications filed by Chinese QDIIs for investment on the local bourse won't be subject to stricter screening procedures than applied to those filed by foreign institutional investors, with the except for some suspicious investment applications.

In addition, in a bid to keep QDIIs from engaging in forex speculation, the FSC announced a ban on QDIIs placing their remitted funds into NT-dollar time-deposit accounts, a stricter revision to the original measures governing QDII investments in Taiwanese stocks, according to which QDIIs can put up to 30 percent of their remitted funds in NT-dollar time-deposit accounts, for a maximum three-month period. The revision is similar to a new restriction on foreign institutional investors, implemented in November.

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