Wisdomtree expands access to onshore China

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.

Wisdomtree received for the first time an RQFII quota of RMB 1.22bn ($180m) in June, SAFE records show. It is now the third US-based firm to hold an RQFII quota, the other two being Blackrock and Acadian Asset Management. Other firms in the US, such as State Street Global Advisors and Bridgewater Associates have recently become RQFII licence holders but have not received their quotas yet.

Wisdomtree has had access to China’s onshore market before receiving an RQFII quota, according to a New York-based spokeswoman for the firm.

She said that two of its China-focused ETFs listed in the US, the Wisdomtree ICBCCS S&P 500 China Fund and the China ex-State-Owned Enterprises Fund already access China’s onshore markets through the Shanghai- and Shenzhen-Hong Kong Stock Connect Programmes.

A broader emerging markets ETF, the Emerging Markets ex-State-Owned Enterprises Fund, also includes A-shares, she added.

She declined to comment whether the firm will be launching new China-focused products, however.

Wisdomtree has been joining forces with Asia-based asset managers. In February, the firm partnered with Hong Kong-based ETF provider Premia Partners to develop smart-beta products for the Asian ETF market. The partnership will, among other things, also provide Asian clients with access to Wisdomtree products.

In mid-2016, the firm also established a relationship with Hong Kong-based ICBC Credit Suisse Asset Management (International) (ICBCCS), the overseas arm of the mainland joint-venture between Industrial and Commercial Bank of China and Credit Suisse, to jointly launch and distribute the Wisdomtree ICBCCS S&P 500 China ETF.

The S&P 500 China ETF was first listed in London in August 2016, according to an ICBCCS statement. In December 2017, it was listed in New York, according to a Wisdomtree statement.

JP Morgan AM

Another RQFII quota recipient is JP Morgan Asset Management in Hong Kong, which received a quota of RMB 5bn in addition to its previous RMB 1bn quota, according to SAFE records.

A Hong Kong-based spokeswoman for the firm explained that the RMB 1bn quota is close to being used up.

“The original quota was used by the JP Morgan China A-Share Opportunities Fund. We applied for additional quota in response to growing client demand,” she said.

Assets in the fund more than doubled to RMB 1.47bn at the end of June from just RMB 411.61m at the beginning of 2017, according to FE data.

The firm’s Singapore-based entity also holds an RQFII quota, amounting to RMB 2bn, according to SAFE records. Entities in Hong Kong, Taiwan and the UK also collectively have $2.81bn in QFII quotas.

On the QFII front, Seoul-based KB Asset Management received an additional QFII quota of $1bn, bringing its total quota to $1.55bn, SAFE records show.

New QDII quotas

Since the quota programmes began, SAFE has awarded a total of RMB 622.07bn in RQFII quotas to 197 licence holders and $100.46bn of QFII quotas to 287 licence holders, according to SAFE records.

RQFII and QFII bring capital into China. By comparison, the qualified domestic institutional investor (QDII) scheme, which was launched in 2006, is a channel for onshore investors to invest offshore.

In June, SAFE awarded QDII quotas of $1.73bn to seven firms.

QDII quotas June 2018 ($m)

Source: State Administration of Foreign Exchange

In total, SAFE has awarded $103.3bn in QDII quotas to 153 entities.

China revived the QDII programme in April after a long halt. In 2015, authorities stopped issuing QDII quota due to concerns over capital outflows and the effect on the country’s currency.