(MENAFN - Arab Times) Kuwait Investment Authority (KIA) has obtained an initial 300 million quota to buy yuan-denominated stocks and bonds, the Chinese authorities announced, a major step for Kuwait's sovereign wealth fund to diversify its investment options through its Beijing office.
The State Administration of Foreign Exchange (SAFE) allows KIA to initially invest up to 300 million in mainland China's securities market as a qualified foreign institutional investor (QFII), according to SAFE's official announcement over the weekend.
KIA has applied for the full 1 billion investment quota, the maximum amount that a single QFII can obtain from the SAFE. Subject to SAFE's approval, KIA will be able to increase the quota every month until it reaches the 1 billion ceiling.
The approval of the initial investment quota came two months after KIA received the QFII status from the China Securities Regulatory Commission, the nation's top securities regulator, to become the second qualified Middle Eastern fund after Abu Dhabi Investment Authority.
Since approval of QFII license on Dec 21, KIA had been waiting for quota allocation from the SAFE under the scheme to start making securities investments in the Chinese mainland. QFII investors are usually required to wait months to receive investment quota from the SAFE, which regulates China's foreign currency.
China's domestically listed yuan-denominated A-graded shares and bonds are generally only available to mainland investors and the limited number of QFII license holders.
China launched the QFII program in 2002 on a trial basis to allow qualified overseas funds to investment in the world's third-largest stock market within the SAFE-set quota.
As of March 9, the authorities had granted QFII status to 129 foreign institutions with a combined investment quota of 24.55 billion. The SAFE has already secured approval of the State Council, China's Cabinet, to raise the combined limit for QFII operations, paving the way for KIA to win extra quota in the near future.
Kuwait Investment Beijing Representative Office (KIRO) was inaugurated last October as KIA's first overseas office since the establishment of Kuwait Investment Office in London in 1953. KIRO closely works with its head office and mainly serves as a platform for exploring lucrative investment opportunities, with an initial focus in China, but also in the Far East.
In addition, the Beijing office is heavily tasked with strengthening fund's ties with the Chinese government and companies in order to be among the first to grab any new opportunities. KIA, which manages Kuwait's oil generated-assets, has so far participated as cornerstone investors in Industrial and Commercial Bank of China, Agricultural Bank of China, and most recently in CITIC Securities.
Cornerstone investors are a handful of elite institutional investors who are guaranteed shares early in initial public offerings (IPOs) in exchange for a pledge to hold the stocks for a period. The fund's investments in Greater China including Hong Kong have grown nearly five times to 10 billion from 10 years ago.
As for mainland China alone, the figure has jumped to 5.6 billion from zero in the past five years.