China offshore funds halt subscriptions as HK share binge exhausts quotas

[SHANGHAI] A sudden surge in mainland money chasing after Hong Kong's share rally has prompted a dozen Chinese overseas mutual funds to suspend subscriptions on certain products, citing quota limits and the interests of existing fund investors.

Chinese funds that invested overseas under the Qualified Domestic Investor (QDII) pilot scheme had long struggled to attract investor interest but now they are in demand as a quick route into Hong Kong stocks.

Hong Kong shares rallied to a seven-year high in record turnover on Thursday on heavy buying by mainland investors, who for two days running have bumped up against the daily limits of the Shanghai-Hong Kong Connect scheme that allows them to buy Hong Kong stocks.

GF Fund Management Co said in a statement on Friday that its GF Global Select Stock Securities Fund has halted new subscriptions because its QDII overseas investment quota, at US$600 million, had been exhausted.

The company said it is applying for a new quota from China's foreign currency regulator and will reopen the product to new investors once it gets approval.

The foreign currency regulator had granted $90 billion in QDII quotas as of the end of March, including US$37.6 billion to mutual fund companies.

China Asset Management Co also suspended subscriptions to one of its QDII products on Friday, saying it wanted to "protect the interests of fund investors and ensure stable operation of the product".

China Universal Asset Management Co, HuaAn Funds and Yinhua Fund Management Co have also closed some of their QDII products to new investors over the past two days.

REUTERS