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By Selena Li
HONG KONG (Reuters) -Standard Chartered has suspended new investments by its clients in China into offshore products via a quota-based channel, the bank said, amid a surge in demand for overseas investments due to weakness in the local market and currency.
The London-headquartered bank, in a statement to Reuters, cited "commercial reasons" as its explanation for the suspension of new investments under the qualified domestic institutional investor (QDII) programme. It did not elaborate.
StanChart's move comes amid Beijing's efforts to stem capital outflows as weaker yuan and a slowing economy have driven savers to move assets offshore.
The QDII programme, first launched in 2006, remains the largest outbound investment channel for Chinese investors. The scheme is capped by a quota set by the State Administration of Foreign Exchange (SAFE).
The programme helps Chinese wealth and corporate clients invest in offshore funds, bonds and other structured products.
In a client note issued by StanChart last week, which was reviewed by Reuters, the bank said it would not take new subscriptions into offshore-domiciled funds sold via the QDII programme with effect from last Thursday.
"Standard Chartered China has suspended the subscription of relevant products for commercial reasons," the bank said in response to Reuters queries.
Domestic investors' appetite for overseas assets has been growing strongly since late 2022, as China's stock market performance lagged the U.S. and other major offshore markets.
China's blue-chip CSI300 index hit five-year lows this month, and is down 18% in about a year, pummelled by an unprecedented debt crisis in the property sector and a lack of large-scale government stimulus.
"Based on the data the probability is far greater that it was a commercial decision based on quota limitations rather than a stab in the dark that guidance from Beijing forced the issue," said Peter Alexander, founder and managing director of China consultancy Z-Ben Advisors.
"There's been no new quota issued to StanChart since 2021," he said. "Clearly there's been a surge in demand over the past several months and with that QDII quota capacity would have been reached."
CAPITAL OUTFLOWS
As economic and geopolitical woes spur an exodus of investors from China, many have been redirecting money into other markets including Japan, giving the benchmark Nikkei index an extra boost as it rockets to all-time highs.
Beijing has unveiled a slew of market support measures since last August, which included reducing trading costs, slowing the pace of initial public offerings and prioritising the launch of equity funds.