January 8, 2012 5:11 am

HK approves first set of RQFII funds

Hong Kong’s Securities and Futures Commission (SFC) has allowed four fund managers to kick-start their renminbi qualified foreign institutional investor (RQFII) businesses in the territory by approving their respective funds.

The SFC approved the four RQFII funds from CSOP Asset Management, Da Cheng International Asset Management, China Universal Asset Management (Hong Kong) and Guotai Junan Assets (Asia) on December 30, marking the first set of such funds to be approved for sale in Hong Kong.

The SFC approval came shortly after the China Securities Regulatory Commission (CSRC) granted RQFII licences to 21 companies on December 22. Nine of those licences were for fund management companies, and 12 for securities firms.

China’s State Administration of Foreign Exchange (SAFE) announced on December 30 that it has granted Rmb10.7bn in total RQFII quotas, so far, to five fund companies and five securities firms. The programme’s total investment quota is set at around Rmb20bn.

The biggest RQFII quota, Rmb1.2bn, went to China Asset Management Company, while seven others received quotas of Rmb1.1bn.

The RQFII programme, which is an expansion of the dollar-denominated qualified foreign institutional investor (QFII) programme and was previously referred to as mini-QFII, allows Chinese financial firms to establish renminbi-denominated funds in Hong Kong for investment in the mainland.

RQFII also allows institutional investors outside of China to facilitate investments of offshore renminbi deposits back into Chinese capital markets. The original QFII programme, on the other hand, allows foreign institutional investors to convert foreign currencies into renminbi to invest in China.

Among the four managers to have received SFC approval for fund launches, CSOP will start an initial public offering for its RQFII fund, the China Southern Shen Zhou RMB Fund, early this month, according to a marketing officer from the company, who declined to be named due to internal compliance issues.

The fund will invest most of its assets in the Chinese onshore bond market. Investors will be allowed daily redemptions, according to the officer.

“China’s interest rate is much higher than Hong Kong’s so we expect the RQFII product will be very popular among Hong Kong investors,” says the CSOP marketing officer.

Established in 2008, CSOP is the Hong Kong subsidiary of Shenzhen-based China Southern Fund Management.

Da Cheng International received SFC approval for its RMB Fixed Income Fund. The company will invest at least 80 per cent of its RQFII assets in China’s bond market, while a maximum of 20 per cent will be allocated to the mainland equities market, it says.

Da Cheng International has been fully prepared for the launch of its RQFII fund in Hong Kong, says Doris Lian, Hong Kong-based chief executive of Da Cheng International. Its parent company, Shenzhen-based Da Cheng Fund Management, is expected to provide support for the RQFII fund.

China Universal received SFC approval for its RMB Bondplus Fund. The Hong Kong subsidiary of Shanghai-based China Universal Fund Management started to prepare for its RQFII fund four years ago, according to an announcement. The company believes now is the right time to invest in China’s bond market, according to an announcement. It notes that 2012 could turn out to be a milestone for China’s bond market, as the country’s regulators are building up this market by deepening regulations and encouraging creative products.

China Universal has engaged in an advisory business for renminbi-denominated bond investments since its establishment in Hong Kong in early 2010. Its parent company’s bond team in Shanghai will manage its RQFII fund, according to the announcement.

Guotai Junan Assets (Asia), the asset management arm of Hong Kong-based Guotai Junan International, received SFC approval for its Great Dragon China Fixed Income Fund. The company could not be reached for comment.

Glori Ye is a reporter on Ignites Asia, a Financial Times publication, where this article first appeared

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