Equity derivative houses are anticipating new allocations of China's 'A' shares, which will allow them to up the amount of market-access derivative products they can sell. Many firms are already tapped out of previous 'A' share allocations, which they use as hedges for investment products linked to the shares. Dealers expect the new allocation within the next few months, following recent meetings with regulators. A senior equity specialist at a European house said, "I expect this to happen before the end of the year."
Earlier this year Chinese regulators announced plans to increase allocations for the Qualified Institutional Investor scheme, which allows investors access to onshore 'A' share equities, from USD4 billion to USD10 billion (DW, 5/6). In recent weeks QFII holders have been making their case to regulators for increased allotments and expect allocations to be announced somewhat soon. "We've all been up to Beijing to grovel for our share," quipped an equity head at an international house. He added, "They're very focused on the percentage that will be used in stocks." The government is trying to ensure the quotas will primarily be used for equities rather than for holding bonds or the currency for speculative plays on the anticipated further strengthening of the renminbi.
