A growing number of money managers are turning to the renminbi qualified foreign institutional investor program as their conduit of choice to provide clients with direct exposure to China's domestic stock and bond markets.
On Jan. 7, Ashmore Group, a London-based emerging markets bond and equity boutique, announced that it had become the first manager outside of Hong Kong to garner an RQFII license from China's regulators.
Two days later, Source — a London-based provider of exchange-traded products — and CSOP Asset Management, a Hong Kong money manager, announced the listing on the London Stock Exchange of the CSOP Source FTSE China A50 UCITS ETF, the first exchange-traded fund in Europe to offer investors direct exposure to China's domestic equity (A-share) market.
And on Jan. 16, Deutsche Asset & Wealth Management and Harvest Global Investments Ltd., the Hong Kong arm of Beijing-based Harvest Fund Management Co., listed their db x-trackers Harvest CSI300 Index UCITS ETF on both the LSE and the Deutsche Borse, two months after a New York Stock Exchange listing. The U.S. version now has more than $200 million, noted Marco Montanari, DeAWM's Hong Kong-based managing director of passive asset management, Asia Pacific, in an e-mail.
Launched in November 2011 as a first step in the internationalization of the renminbi, the RQFII program awards quotas to money managers — initially limited to approved affiliates of Chinese firms in Hong Kong — enabling them to directly invest offshore renminbi in China's domestic stock and bond markets.
Last year, the program was expanded beyond Hong Kong, adding RQFII centers in Taipei, London and Singapore.
The RQFII program effectively opened up a second door for overseas investors to China's closed capital markets, following the 2002 launch of the country's qualified foreign institutional investor program. With QFII, China's regulators extend U.S. dollar-based quotas to investment banks, asset managers and, increasingly, to big institutional investors such as central banks and sovereign wealth funds.