An Analysis of Investment Characteristics of QFIIs in the Chinese Security Markets

We analyzed investment characteristics of qualified foreign institutional investors(QFIIs) through finding what kind of firms is preferred to foreign investors in Chinese security markets. For the purpose of this study, we used a panel of foreign equity holdings of QFIIs from 2004 to 2008. The results from time series cross-sectional regression showed the variables of ROA, firm size and P/E ratio were significant at the significance level of 10%. That is, The variables of ROA and firm size were significantly positive and P/E ratio was negative. Therefore, we found strong evidences that qualified foreign institutional investors focused on the leverage, company size, profitability, and P/E ratios in China. This results were also confirmed by the logistics regression.