Small-fry mainland investors ruled out

WHILE the doors have been opened for private mainland investors to directly trade in Hong Kong shares, small-timers are being discouraged.

A minimum capital amount of HK$100,000 (US$12,800) is required for a Hong Kong play.

The move will not dampen the allure of banks' Hong Kong shares-linked QDII products, said analysts and bankers yesterday.

Direct Hong Kong shares trading through a newly announced pilot program will be launched as early as this month.

Investors cannot take up new offerings but shares already listed are open season, Bank of China International Holdings said yesterday.

The State Administration of Foreign Exchange on Monday approved the trial program to allow private investors to trade Hong Kong shares directly via mainland accounts from the Bank of China.

Analysts said the HK$100,000 minimum requirement has a dual aim:

To drive out retail investors who may be credit risks.

To protect small investors from losing money in an unfamiliar market.

"The threshold is sensible to avoid hordes of people dashing to bank outlets for the business," Xu Yinhui, a Guotai Jun'an Securities Co analyst, said yesterday.

His view was supported by Qian Qimin, a Shenyin & Wanguo Securities Co analyst. Both said the pilot program will not hit the newly introduced QDII products invested in the Hong Kong market.

"The QDII products have the attraction of a professional team to run funds with more stable returns, while the new initiative is suitable for investors with a sophisticated knowledge and a higher ability to cover risks," said a banker in charge of QDII products with a big state-owned lender in Shanghai.

"The pilot program adds another investment option but not all investors have the ambition and knowledge for it.

"The prospect of siphoning capital may be there, but it may not be a big blow."

China's banking regulator in May expanded the investment scope of QDII products by allowing them to invest as much as 50 percent of QDII funds in overseas stock markets.

The new QDII products have been well received by investors.

The Shanghai branch of the Industrial and Commercial Bank of China has pooled more than 900 million yuan (US$118,400) from clients for the products, almost five times its target of 200 million yuan.

The Bank of Communications has also collected about 1.8 billion yuan from its new QDII products in June, far exceeding its target of one billion yuan.

The Shanghai-based lender plans to issue a similar product in September after the demand.