China increases quota for QFII in 3Q

Govt also likely to raise limit for yuan investments

China boosted the quotas it gives foreign institutions to invest in domestic securities by the largest amount in the third quarter since the final quarter of 2012 and regulators may also raise the limit on a parallel yuan-denominated program.

China accelerated quotas awarded under the Qualified Foreign Institutional Investor (QFII) program as the quarter progressed, adding $2.5 billion in September, according to data released by the State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, on Friday.

The total outstanding quota is now $62.2 billion.

At the end of August, the outstanding amount of China's dollar-denominated QFII programme stood at $59.7 billion, the SAFE statistics showed.

Regulators gave the largest award of the month to the Hong Kong Monetary Authority, adding $1 billion to take its quota to $2.5 billion.

China is also considering raising quotas for foreign investors under the separate Renminbi Qualified Foreign Institutional Investor (RQFII) program as Hong Kong-based investors have almost exhausted their allocations, Guo Song, the head of SAFE's capital account department, said on Thursday.

Launched in 2011, the RQFII scheme allows financial institutions to use offshore yuan to invest in the mainland's securities markets, including stocks, bonds and money market instruments.

Under the scheme, the central government has granted a quota of 270 billion yuan ($44 billion) to Hong Kong, 50 billion yuan to Singapore, 80 billion to London and 80 billion to Paris.

Data for September released by SAFE on Friday showed that while investors in Hong Kong had exhausted their quota, investors in Singapore and London had plenty left.

It did not provide estimates for Paris.

"The outstanding quota [granted to Hong Kong] is limited indeed. We are working with other departments to study related issues," Guo said.

The State Council also said in May that quotas would be increased for both inward and outward foreign investment under the QFII and Qualified Domestic Institutional Investor programs.

"China's capital markets are still not mature, and some systemic problems still exist. New problems are continually appearing," the State Council said in a statement posted on its website in May.

"We will persevere with market-based and rule of law-based orientation and uphold open, equal, and fair market order," the statement said.

On derivatives, the State Council pledged in the statement to reduce restrictions on the use of derivatives by both institutional investors and corporations for the purpose of hedging and risk management.