First Fund For Foreigners In China Hits US Snag

Hong Kong, July 30: | Updated: Jul 31 2003, 05:30am hrs
What had been billed as the first fund for foreigners to invest in Chinas yuan-denominated securities markets will launch a month late and several million dollars short after running foul of US Securities rules, sources familiar with the situation said on Wednesday.

Edinburgh-based Martin Currie Inc had said earlier this month it intended to list its China A Share Fund on the Dublin stock exchange on July 23, with a hoped-for $50-$70 million in funds from institutional investors.

Instead, the launch will be delayed until late August and without US Investors after the fund manager gave an interview to Barrons magazine in the US, which was deemed by US Regulators to be a solicitation for investment in an unregulated vehicle, a source said.

Officials at Martin Currie, which manages $9 billion globally, declined to comment.

The fund will get access to the mainlands previously off-limits yuan-currency share and bond markets through the $300 million investment quota granted this year to investment bank UBS AG

We remain committed to seeing it successfully launched, a UBS spokesman said, declining further comment.

Under the terms of Chinas new Qualified Foreign Institutional Investor (QFII) scheme, UBS among the most aggressive participants must relinquish whatever portion of its $300 million investment quota it does not use by September 4.