UBS, one of the world's leading financial service firms, Wednesday became the first foreign financial institution to invest in the US$500 million A-share market in China.

It placed its first order under the QFII (qualified financial institutional investor) scheme Wednesday in the market, which was previously open only to domestic investors.

But the long-anticipated deal, billed by many as a major boost to the market, failed to prop up China's flat yuan-currency A-share market, which ended on Wednesday 8.7 points lower to stand at 1,503.3 on the Shanghai Stock Exchange.

The order for the purchase of four A shares includes Baoshan Iron & Steel at 5.24 yuan (63 US cents) per share, Shanghai Port Containers at 12.65 yuan (US$1.52) per share, Sinotrans Air at 20.58 yuan (US$2.48) per share and ZTE Corp at 18.11 yuan (US$2.18) per share.

These shares closed at 5.29 yuan, 12.83 yuan, 20.55 yuan and 18.46 yuan respectively yesterday.

But the firm declined to unveil the extent of its investments from its initial quota pool of US$300 million, approved by the China State Administration of Foreign Exchange last month.

UBS was given the green light to become a foreign investor under the QFII scheme in late May, making it the first foreign financial investor to get the nod, after submitting an application in late March. China hopes to further open its capital market to foreign investors with the introduction of the QFII system.

Judging from the trade volume and performance of these four listed firms yesterday, analyst said the first order is simply symbolic.

"QFII funds cannot play a leading role in the market for a long time, restricted by the scale of the funds and the limited number of listed firms offering investment opportunities,'' said Wu Xiaoqiu, a financial expert with Remin University of China.

"This is just a beginning,'' said John Holland, head of UBS's Asia Equities. "The response from clients has exceeded our expectations. We have seen very positive interest from a broad range of investors from around the world.''

He Di, vice-chairman of UBS's Investment Banking Unit, said the company will further enlarge its pool for investment in the A-share market, with approval from the central regulatory bodies.

"The start of investment marks the beginning of an new phase in the development of UBS's business in China. As the domestic securities market opens up and information becomes more available, we expect to see a significant increase in the level of investment by foreign institutions,'' said Nicole Yuen, head of UBS's China Equities.

With 68,000 employees in over 50 countries, UBS is today one of the world's largest asset and wealth management, investment banking and securities firms.

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