China is expected to allow its social security fund, which manages more than $14 billion, to invest in overseas financial markets, with Hong Kong the priority destination, a top Hong Kong government official said on Tuesday.
The National Social Security Fund, set up a few years ago to help shore up a fragmented and under-funded social security system, manages more than 120 billion yuan (US $14.49 billion) of assets. It has applied to make overseas investments.
"I believe the social security fund's overseas investment policy will be approved," Frederick Ma, secretary for financial services and the treasury, told reporters in Beijing after meeting Xiang Huaicheng, the head of the welfare fund.
"Hong Kong will be selected as the preferred market for investment," he said in comments broadcast on television.
Ma did not say how long it might take China to grant formal approval or indicate the potential size of the investments that could be made by the fund, which groups pensions with medical and unemployment insurance.
But the news failed to stir the Hong Kong stock market because investors believe Beijing's approval will take time.
Traders said they expected the fund to ultimately invest in stocks that provide financial exposure not currently available in China.
"We expect Hong Kong to be the first beneficiary of this as it provides access to some of the global themes, which can't be accessed directly from the mainland perspective," said Mark Konyn, chief executive for Allianz Dresdner Asset Management.
Traders said Hong Kong's market could get a bigger push once China approves the fund's overseas investment policy.
Last year, Beijing allowed the fund to invest in Chinese stocks in a bid to close a state pensions deficit in the world's most populated country.
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