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Bourse issued caution for H-share investment

(Shanghai Daily)
Updated: 2007-06-29 08:54

Chinese mainland citizens should not divert funds into Hong Kong-listed shares via illegal channels or entrust capital to unqualified private-equity funds for stock investment, the Shenzhen Stock Exchange warned in a notice yesterday.

Investors who seek to buy securities listed in Hong Kong outside the Qualified Domestic Institutional Investor scheme are not legally protected and face losing their money, the bourse said.

China last year launched the QDII program to let domestic banks help clients invest in securities abroad and expanded the program early this month to fund management firms and brokerages.

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B ut a large number of domestic citizens sought the help of agents such as mainland brokers with Hong Kong offices or Hong Kong brokerages to illegally invest their money in the city's stock exchange, the notice said.

As China still restricts cash flows under the capital account, citizens who hope to retrieve their illegally siphoned-out capital from the Hong Kong market have to use "underground" channels, adding to risks of losses, according to the notice.

The Shenzhen bourse also advised that mainland citizens should be cautious against unaccountable securities consulting agencies, which promised investors high returns and eventually misused their capital.

People shouldn't rush to entrust their money to private-equity funds without evaluating their qualifications. They should also not divulge their passwords of their stock-trading and bank accounts directly to money managers, according to the notice.

If citizens choose to let private equity funds help arrange stock investments, they must sign iron-tight agreements to clarify their legal rights, the notice said.

Chinese mainland shares have nearly tripled in value since early 2006, prompting the stock regulator and exchanges to educate investors.