The expansion of a program allowing Chinese banks to invest overseas could restrain the yuan's appreciation, Hong Kong Monetary Authority Chief Executive Joseph Yam (任志剛) said yesterday.
China's banking regulator said Friday it will expand the Qualified Domestic Institutional Investor program to allow approved banks to invest in foreign stocks and equity-linked products on behalf of clients -- a move that could divert some of the money poured into domestic markets. Approved banks can already invest in fixed income products.
"[The move] may be able to alleviate the special macro-financial situation in China, for example the pressure on its exchange rate,'' Yam told reporters.
The yuan has risen 5.3 percent since a revaluation of 2.1 percent in July 2005, but with the country's growing trade surplus the yuan is likely to rise further.
Yam, the head of Hong Kong's de-facto central bank, said the expansion of the investment program provides a new option for the investment of capital from China.
If Chinese investors divert some of their money into foreign stocks, it could cut demand for stocks in China -- where the Shanghai benchmark index is up 50 percent this year after a 130 percent gain last year -- and ease demand for the yuan.
The China Banking Regulatory Commission said in a notice on its Web site on Friday that stocks can make up a maximum of 50 percent of the net value of an overseas investment product offered by a bank under the QDII program.
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