Kuwait's China investment quota up to $1bn

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China's foreign exchange regulator has increased the amount which Kuwait's sovereign wealth fund can invest directly in the Chinese securities markets to US$1bn, state news agency KUNA reported on Sunday.

The regulator awarded Kuwait an additional US$700m quota on top of US$300m awarded in March last year, KUNA said. Kuwait said last year that it was seeking a maximum quota of US$1bn.

The quota allows the fund to buy yuan-denominated stocks and bonds. Only five other foreign investors in China have quotas as large as US$1bn, according to Reuters records; they are Qatar Holding, the Hong Kong Monetary Authority, Norway's Norges Bank, Government of Singapore Investment Corp, and Singapore-based investment firm Temasek Fullerton.

Chinese officials were not immediately available to comment on the KUNA report. But Guo Shuqing, chairman of the China Securities Regulatory Commission, indicated last week that authorities would continue to open up channels for overseas fund inflows into China, lifting sentiment in the local stock market.

He told a forum that quotas for the Qualified Foreign Institutional Investor (QFII) scheme, under which Kuwait is investing, as well as a complementary programme, the Renminbi Qualified Foreign Institutional Investor scheme, could increase tenfold, though he did not specify a time frame.

Until last month, the maximum quota for any QFII investor was US$1bn, but the foreign exchange regulator has now said funds can apply to invest over that amount.

Kuwait, one of OPEC's top crude oil exporters, has a sovereign wealth fund managing assets well in excess of US$300bn. The fund said last October that its investments in greater China, including Hong Kong, had grown to US$15bn, KUNA said.

While Gulf funds have historically preferred to invest in Europe, many are expected to boost investment in Asia as growth in the West slows and commercial ties deepen between the regions.

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