Traders warned about China's market

Vice Minister of Finance Lin Tzong-yeong (林宗勇) said yesterday that local investors need to be cautious when investing in China's B-shares.

Last week, China announced plans to open its B-share market to domestic retail investors, a move which has attracted strong interest in Taiwan because the mainland would allow Taiwanese individuals to invest along with their mainland counterparts.

Lin said Taiwanese investors should be prudent because there is no legal channel for them to invest funds and that they may have difficulties in repatriating money back to Taiwan.

Taiwan currently bans local mutual funds from investing directly in Chinese companies. However, the rules are very vague with regards to red chip shares -- which by definition are Chinese companies that are registered and publicly traded in Hong Kong.

Meanwhile, the Securities and Futures Commission (證期會) is in the process of drafting clearer regulations on Taiwanese mutual funds investing in red chip shares.