The Cabinet yesterday approved a proposal to significantly relax limitations on local fund managers when investing in Chinese stocks and Chinese companies listed on the Hong Kong and Macau exchanges, aiming to help local brokerage houses expand their business overseas.
The new rules allow Taiwanese brokerage houses and mutual fund companies to increase their investments in Chinese shares to a value of 10 percent of their total assets, up from 0.4 percent. The restriction that firms can only invest 10 percent of their total net assets in red-chips and H-shares traded in Hong Kong and Macau will be removed entirely.
“The move will help local finance firms to expand their operations to China, Hong Kong and Macau,” Executive Yuan spokeswoman Vanessa Shih (史亞平) said at a press conference yesterday.
No date was given for when the change would take place.
The government may further raise the ceiling in the future in accordance with the policy to relax restrictions on China-bound investment by Taiwanese companies, which is capped at 40 percent of their total net assets.
On May 27, 2004, the previous administration permitted offshore mutual funds of local securities firms to invest 0.4 percent of their net assets in foreign stock markets, including China. The cap for investments in red-chips and H-shares was set at 5 percent of net assets, which was raised to 10 percent in January 2005.
China, after Thailand, ranks second on US investment bank Merrill Lynch’s favorite Asian markets, despite recent volatility, a report on country asset allocation in Asia, called the “Weather Forecast,” said yesterday.
Merrill Lynch gave a heavy overweight rating on Chinese stocks.
As of April 29, China’s stocks had fallen 12 percent since the beginning of the year, compared with the region’s average decline of 9 percent, the report said.
“The currency outlook, earnings growth and gross domestic product (GDP) growth, are all stable from the last Weather Forecast,” Merrill Lynch said in the report.
Merrill Lynch forecasts China’s economy will expand 10.9 percent this year, the fastest in Asia, and inflation will be at 7.5 percent.
Dairy firm China Mengniu Dairy Co, supermarket operator Wumart Stores Inc (物美集團) and China’s biggest mobile operator China Mobile (中國移動) are Merrill Lynch’s favorite picks, the report said.
ADDITIONAL REPORTING BY LISA WANG
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