Tue, Jan 25, 2005 - Page 10 News List

Government may lift HK fund limits

POLICY SHIFT?Media reports say a limit on funds investing in Hong Kong may be raised to 10 percent, but the FSC says the change is not finalized

By Joyce Huang  /  STAFF REPORTER

The government is slated to relax a cap on funds that invest in Hong Kong-listed Chinese companies, raising the limit from 5 percent of total assets to 10 percent next month, local media reported.

But Financial Supervisory Commission (FSC) vice chairman Lu Daung-yen (呂東英) yesterday said that the "the relaxation still requires inter-ministerial meetings to reach a final decision."

The FSC doesn't have the final say, he added.

Lu refused to comment on whether raising the cap to 10 percent is the government's policy direction.

Last month, FSC Chairman Kong Jaw-sheng (龔照勝) told the legislature that a relaxation of the restrictions would be good for the development of the local fund market, adding that the change would require the final approval of the Mainland Affairs Council.

He added that the FSC would take an active role and discuss the possibility with the council, and would support the relaxation.

In addition to the easing of the investment cap, local trust funds would also be allowed to begin sales in Hong Kong -- to raise capital from Hong Kong and Macau -- once both sides ink an agreement officially acknowledging each other's markets as being legal, according to a local media report.

Memorandum

The report added that Kong is expected to sign a memorandum of understanding with Andrew Sheng (沈聯濤), chairman of Hong Kong's Securities and Futures Commission, during a meeting of the International Organization of Securities Commissions, to be held in Taipei on Feb. 24.

Kong, on his return from a low-profile visit to Hong Kong two weeks ago, confirmed that Sheng had agreed to attend the meeting.

Further Cooperation

Kong also hinted that there may be a window of opportunity for further cooperation between Hong Kong's and Taiwan's fund markets if Sheng successfully makes the trip, which is sure to be opposed by Chinese finance officials.

Possible easing

* The current rules restrict funds from investing more than 5 percent of total assets in Hong Kong-listed Chinese companies

* The limit may be raised to a 10 percent cap

* The FSC says the change requires the approval of the Mainland Affairs Council

* The FSC's head is expected to sign an agreement with the head of Hong Kong's Securities and Futures Commission next month


Local fund managers lauded the possible relaxation on Chinese investments, saying that it will help boost the nation's asset-management market, according to the report.

The report further quoted Invesco Taiwan Ltd (景順投信) as saying that it may reconsider resuming sales of funds in Taiwan if the restrictions are eased.

Invesco previously terminated sales of four of its funds in Taiwan because of the 5 percent investment cap.

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