Saturday, July 7, 2012

BOK kicks off investment in China's stock markets

SEOUL, July 1 (Yonhap) -- South Korea's central bank said Sunday that it has launched its investment in the Chinese stock markets in a bid to diversify its portfolio of foreign exchange reserves.

   In December, the Bank of Korea (BOK) earned qualified foreign institutional investor (QFII) status from China's financial authorities, which allows the bank to invest in stocks and bonds traded on China's financial markets. The BOK was allowed to invest US$300 million in yuan-denominated assets.

   The BOK said it had entrusted the allocated money to asset managers including domestic ones and they began to invest the money to trade yuan-denominated "A" shares on the Shanghai and Shenzen bourses in late June.

   The central bank said that it is too early to say whether it will apply to get an additional quota for investing in the yuan-denominated assets.

   "As the BOK has just launched its (yuan) investment, whether to apply for further quota would depend on future situations," said Kang Sung-kyung, an official at the BOK's reserve management group. In April, China's financial authorities raised the total maximum QFII quota to $80 billion.

   Under the QFII scheme, only approved foreign institutions are allowed to invest in China's stock and bonds within quotas set by Beijing's financial authorities.

   The move came as part of the BOK's efforts to diversify the portfolio of the country's foreign exchange reserves worth $310.87 billion, the seventh-largest in the world.

   In a related move, in April the BOK launched its investment in yuan bonds traded on China's over-the-counter market after receiving the qualification earlier this year.

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