China’s banking regulator has recognised Malaysia as an approved investment destination, paving the way for an inflow of Chinese funds into this country, the Securities Commission (SC) said.
The SC said Malaysia had now become an approved investment destination under China’s Qualified Domestic Institutional Investor (QDII) scheme and thereby joined the ranks of 10 other such recognised jurisdictions.
They are Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, the United Kingdom and the United States.
SC chairman Tan Sri Zarinah Anwar and China Banking Regulatory Commission (CBRC) chairman Liu Mingkang signed letters of exchange in Beijing yesterday to formalise the recognition. CBRC is China’s banking regulator.
Zarinah said in a media statement: “The QDII programme presents a major opportunity for Malaysian capital market intermediaries to gain access to the Chinese market. They should therefore make full use of the opportunity to broaden their reach to this new pool of investors.”
The programme enables Chinese nationals to invest in overseas markets through approved institutions.
The China Securities Regulatory Commission (CSRC) had also confirmed that based on an existing memorandum of understanding with the SC, Malaysia is an approved investment destination under the QDII programme for Chinese fund management and securities companies.
CSRC is China’s capital market regulator.
“With the recognition, approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities, fixed-income products and collective investment schemes approved by SC.
“Such Chinese institutions may also engage the services of licensed Malaysian fund managers to assist with QDII investment matters,” the SC said.
Bursa Malaysia Bhd said the QDII recognition augured well for the exchange.
“It is aligned with our other initiatives such as improving our country classification for the capital market. We also see this benefiting us in terms of enhancing our attraction as a capital-raising platform for foreign companies, particularly Chinese companies.”
Bursa noted that Malaysia was the second Asean country to be recognised as an authorised market for Chinese investors.
Inter-Pacific Asset Management Sdn Bhd chief executive officer Robbin Khoo said this development paved the way for joint ventures and collaborations between Malaysian fund asset managers and their Chinese counterparts.
“Our relationships can now be reciprocal. Market players can now build relationships where each can be directly involved in the other’s market,” he said.
Khoo added that with Malaysia having promoted itself well as an international Islamic finance hub, there should be keen interest from the part of Chinese investors looking for exposure into syariah-compliant investment products.
It is understood that the Chinese government had mandated the QDII programme to get their institutional and other investors to diversify their funds into different asset classes and different parts of the globe.
“Commodity-based securities or derivatives could be a target investment by China, given its increasing bilateral trades with Malaysia,” pointed out a fund manager familiar with the programme.
It is still unclear how much funds will actually flow into the Malaysian market as a result of this development.
It is understood that Chinese authorities have approved its banks and securities-related firms under the QDII scheme to invest up to US$47.7bil so far. However, it is unclear how much of this has been invested in approved markets.
Canada was the last recipient to gain the QDII status in April. Canadian Finance Minister Jim Flaherty had then said in a statement that the recognition would give Canadian financial markets access to up to US$8bil in investment capital.
