Two days after Prime Minister Manmohan Singh returned from his visit to the People’s Republic of China, a significant move by the Indian stock market regulator, the Securities Exchange Board of India (SEBI) went unnoticed — a green signal for the first-ever Chinese foreign institutional investor (FII) to invest directly on Dalal Street.

While the $206-billion China Investment Corporation, China’s sovereign wealth fund launched last June, is also expected to invest in Indian stocks soon, the first fund to make the cut is one of the most successful domestic players in the Chinese funds market, the China International Fund Management (CIFM) company headquartered in Shanghai’s Pudong area.

CIFM may not represent China’s overall sovereign wealth, but it is run by the finance arm of the Shanghai Municipal government and China’s third largest investment firm, Shanghai International Trust and Investment Company, in partnership with US fund giant JP Morgan Asset Management. CIFM was one of the first few fund houses allowed to invest in international markets after Chinese authorities relaxed rules that restricted overseas investments in June 2007.

Last October, when CIFM launched the first-ever Chinese fund to invest in Asia-Pacific markets (excluding Japan), 2 million domestic investors poured in their savings, with applications worth 100 billion yuan on the very first day. Despite the relatively high minimum subscription amount of 10,000 yuan ($1330) per application, the record response forced the company to close issue of shares in just two days instead of the five days originally envisaged.

... contd.