By Park Hyong-ki
Staff Reporter
Chinese shares have been losing their vigor since early this year on growing agitation over the global economy. The benchmark Shanghai Composite Index tracking A and B shares on the Shanghai Stock Exchange has tumbled more than 50 percent.
Nevertheless, domestic investment management and brokerage firms are showing full commitment to investing in Chinese stocks under the belief that they still remain attractive over the long term.
So far, three asset managers ― Prudential Asset Management Korea, Mirae Asset Investments and Samsung Investment Trust Management ― have gained approval from the Chinese regulator to invest in Shanghai A shares.
Shanghai's A shares traded in the local currency ― renminbi ― are off-limits to foreigners, while B shares, which are quoted in foreign currencies, are open to both domestic and foreign investors.
Foreign investors need to gain a license dubbed the qualified foreign institutional investor (QFII) from China's financial regulator before investing in A shares of companies incorporated in mainland China.
UBS Hana Asset Management, Korea Investment Trust Management and Hanwha Investment Trust Management also submitted an application to the Chinese authority for a license to invest in the A-share market.
Besides asset managers, brokerage houses such as Daewoo Securities, Goodmorning Shinhan Securities and Hyundai Securities have requested the QFII license.
Banks are looking to invest in A shares as well with Woori Bank and the Korea Development Bank awaiting approval from China.
There are a total of 58 designated QFII since China developed the licensing system in 2002. About 80 more foreign institutional investors have applied for the license.
Analysts expect an increasing number of Korean institutional investors to head for the A-share market, following an agreement between Korea and China to boost financial ties.
The financial regulator asked its Chinese counterpart to encourage its banks, brokerages and insurers to invest in Korea's capital market, and swiftly give regulatory licenses to Korean financial firms seeking to invest in the Shanghai A-share market.
To this end, financial companies here are expected to launch more mutual funds investing in A shares.
PCA Asset Korea launched the first fund investing in A shares early this year. Prudential Asset Management Korea followed next with its A-share fund. Mirae Asset and Samsung are also planning to offer such a fund by the end of this year.