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Foreign managers seek more China assets

US-based firms, including Bridgewater Associates and State Street Global Advisors, have become new licence holders in China’s quota programme that allows them to invest in the country’s onshore markets.

China’s qualified foreign institutional investor scheme (QFII) and its renminbi equivalent (RQFII) allow foreign institutional investors to invest in onshore Chinese assets, within allocated quotas.

Connecticut-based Bridgewater Associates has become one of the latest RQFII licence holders, according to records from the China Securities Regulatory Commission. The firm received its licence in May and is waiting for quota to be issued.

Bridgewater, which is also an IM WFOE holder, manages around $160bn in assets on behalf of institutional clients, including corporations, pension funds, endowments and sovereign wealth funds.

Besides Bridgewater, three of SSGA’s US-based entities and the firm’s Ireland-based entity received RQFII licences during the same month.

SSGA’s Hong Kong-based entity has been an RQFII licence holder since 2014 with a quota of RMB 1bn ($150m), according to records from China’s State Administration of Foreign Exchange (SAFE). The firm is also a QFII licence holder with a quota of $50m.

FSA sought more information from the US firms, but they did not respond in time for publication.

Besides the US firms, BOB Scotia International Asset Management also became an RQFII licence holder in May, according to CSRC records. The Hong Kong-based firm, which is the overseas arm of Beijing-based Bank of Beijing Scotiabank Asset Management, is already a QFII licence holder, with a quota of $200m.

Bank of Beijing Scotia Asset Management is a joint venture firm between Bank of Beijing and Canadian Bank of Nova Scotia.

The regulator has not issued new RQFII licences to foreign asset managers since January. The new licences come after MSCI formally included around 230 China-A shares into its three widely-tracked indices.

On the QFII front, the regulator has not given any new licences since November 2017.

In total, there are 225 RQFII licence holders and 307 QFII licence holders, according to CSRC records.

RQFII quota ramp-up

Existing RQFII licence holders have been aggressively topping up their quotas, including UBS Asset Management, Investec Asset Management, Aberdeen Standard Investments, which nearly doubled its quota in February, and Blackrock, which is now one of the biggest RQFII quota holders.

Even Kuala Lumpur-based CIMB Principal Asset Management, which is the only RQFII licence holder in Malaysia, saw its RQFII quota increase to RMB 1.6bn in May from RMB 600m, as reported last month.

Last week, the Malaysian firm said in a statement that it had used up its RMB 600m quota two months after the firm launched the CIMB-Principal China Direct Opportunities Fund. The fund, which was launched in March, invests at least 70% of its assets in China A-shares, mainly small- and mid-cap companies.

“Achieving our target fund size of $100m just after two months speaks volumes of investors’ bullish long-term view of China’s growth story,” Munirah Khairuddin, the firm’s CEO, said in the statement.

Since the quota programmes began, SAFE has awarded a total of RMB 615.52bn in RQFII quotas to 196 licence holders and $99.46bn of QFII quotas to 287 licence holders, according to SAFE records.

Part of the Bonhill Group.