(Yicai) March 15 -- Mutual fund managers in the Chinese mainland are limiting offshore investment through China’s Qualified Domestic Institutional Investor scheme because the quota has been almost exhausted by surging demand from mainland investors.

Some 282 of the 596 mutual funds available in the mainland through the QDII scheme have suspended subscriptions or restricted large investments, according to data from financial information provider Wind Information.

Introduced in 2006, the QDII scheme allows mainland investors to invest in offshore securities, as convertibility of the Chinese yuan is limited by capital account restrictions and the domestic capital market has not yet been fully opened up. The first QDII cross-border arbitrage product was launched in November 2013.

JPMorgan Asset Management China restricted big subscriptions to various funds under QDII on March 8. Mainland investors can invest no more than CNY1 million (USD139,060) in JPMorgan Europe Dynamic Fund, while those seeking to subscribe to the Morgan Stanley Nasdaq-100 Index Fund can invest a maximum of USD100,000.

Other asset managers, including Fullgoal Fund Management, E Fund Management, and China Asset Management, also introduced similar restrictions on QDII products this month.

As of Jan. 28, mutual fund managers in the Chinese mainland had already used USD6 billion to USD7 billion worth of their annual QDII quota, equal to more than 80 percent of the total, according to figures on the Hong Kong website of third-party investment consultants Howbuy.

Fund houses usually bring in buying restrictions on QDII products because they have almost reached the quota and cannot increase it, China Securities Journal reported yesterday, citing Li Yiming, senior analyst at Morningstar's China fund research center. More rarely, they do so to control investment risks amid abnormal fluctuations in the markets where the products are traded, he added.

Widespread buying curbs on QDII products are mainly due to tight foreign exchange quotas on fund companies, fund manager sources in Beijing and Shanghai also told the newspaper. Some recent QDII product transaction prices in the secondary market have been higher than the net asset value of fund shares, meaning that they are trading at significant premiums, they added.

With the Chinese market in a slump since last year, the main reason why quotas have been drained is that some mainlanders have sought offshore gains driven by expected cuts in US interest rates and the frenzy surrounding artificial intelligence, an analyst at a Beijing-based fund told the CSJ.

Editor: Futura Costaglione