(Xinhua)
Updated: 2007-01-18 16:51

Chinese authorities are considering allowing brokers to pool the capital of domestic citizens for investment in overseas stocks in a move to help brokerages diversify their growth channels, industry sources said yesterday.

The approval, expected to be granted as early as the first quarter, will allow brokers to join a batch of lenders, fund managers and insurers in diverting part of the nation's US$2 trillion in household savings to other investments.

A string of giant brokers, including CITIC Securities Co and China International Capital Corp, have applied to the watchdog to join the qualified domestic institutional investor (QDII) scheme, people familiar with the matter said.

The China Securities Regulatory Commission is now vetting the applications and may allow select brokers to be pioneers in the program on a case-by-case basis, the sources said.

Each brokerage must also apply for a quota from the State Administration of Foreign Exchange over how much local currency they can convert into foreign exchange to invest in foreign stocks and bonds.

"Domestic brokers have long been lobbying regulators for licenses in the QDII program and the nod is quite near now," said a Shanghai-based source close to the matter. "Stronger players such as Citic and CICC are likely to test the scheme first."

"Allowing brokers to tap retail investors for overseas asset-management business can significantly boost their sources of revenue," said a second source close to the regulator. "It will also boost competition among financial firms to lure clients."

China in May initiated a campaign to urge banks, fund managers and insurance firms to help clients buy foreign currencies and invest in overseas capital markets as it bids to ease growth in forex and channel personal savings out of its banking system.

So far, 13 lenders and 11 insurers have been granted a collective quota of about US$16 billion to trade securities overseas. Hua An Fund Management Co is the only fund firm so far approved to invest abroad with a limit of US$500 million.