Fund managers advised on China’s new RQFII regime

"The RQFII needs an elapsed time, including applying for a licence and a quota, that has a normal turnaround time of about six months, so you should apply for this new opportunity now to invest in the China perspective," Patrick Wong, head of China sales and business development at HSBC Securities Services, said yesterday.

The RQFII regime allows asset managers to launch funds or products for raising yuan (aka renminbi, or RMB) offshore to invest in the Chinese markets.

Available instruments include mainland stocks, bonds, warrants, fixed-income debt, securities investment funds, index futures and initial public offerings.

This is mainly a regime or channel for institutional investors in Thailand to become eligible to invest in China.

"Whether you can activate your investment or not really depends on the situation and also on the market perspective," he said.

Wong said he did not have a "crystal ball" to predict how the market will perform in the next six months, but overall, on a global basis, there was already demand from European institutional investors for China’s fixed-income products via this channel.

There are some asset managers in Asia and Thailand who have already expressed their interest for exchange-traded funds under this new regime.

"In Asia, we have more inquiries about how to access China now, so I will say that demand is there, definitely in the short term. And recently, because of the market volatility, there are more questions about how to access China, and in different perspectives as well," he said.

Only qualified financial |institutions registered in the |16 approved RQFII sites with |an asset-management licence issued by the local securi-|ties regulator are allowed to invest in China via the RQFII regime.

The sites are Australia, Canada, Chile, France, Germany, Hong Kong, Hungary, South Korea, Luxembourg, Malaysia, Qatar, Singapore, Switzerland, Thailand, the United Arab Emirates and the United Kingdom

Thailand’s RQFII quota is 50 billion yuan.

The RQFII programme does not impose investment allocation restrictions, so it is more flexible for asset managers to structure their products based on investor demand with daily liquidity and no lockup period.

The RQFII also has additional quota applications based on utilisation with no requirements for assets under management, which increases flexibility.

Foreign currencies can be exchanged offshore, which is more transparent.

"The FX rates of the offshore and onshore RMB are quite different in the market, so most asset managers prefer to do FX offshore," he said.