China grants RQFII permit to Singapore’s GIC

Securities regulator CSRC has handed GIC Private Limited a licence to invest in onshore mainland assets. It was among a raft of approvals, including five Korean asset managers.
China grants RQFII permit to Singapore’s GIC

China’s securities regulator has handed out a renminbi qualified foreign institutional investor (RQFII) licence to GIC Private Limited.

The China Securities Regulatory Commission (CSRC) made the announcement late last night. It was one of 10 new RQFII permits to be announced, five of which went to Korean asset managers as they step up their international diversification drive.

GIC Private Ltd is wholly owned by the Singapore government and comprises three major sovereign wealth enterprises: GIC Asset Management, GIC Real Estate and GIC Special Investments.

Authorities in Beijing officially handed Singapore a total RQFII quota of Rmb50 billion in October 2013. GIC must now apply to the State Administration of Foreign Exchange for quota to invest in onshore mainland assets.

Prior to last night 10 Singaporean entities had already been handed an RQFII licence. The first three, announced on May 21 last year, were Nikko Asset Management, APS Asset Management and Fullerton Fund Management – the latter a wholly owned subsidiary of Singapore sovereign fund Temasek Holdings (Private) Ltd.

Both Nikko AM and Fullerton were handed their RQFII quotas just over a month later on June 30, with the former receiving Rmb1 billion ($160 million) and the latter Rmb1.2 billion.

In response to CSRC’s announcement, one senior industry source told AsianInvestor: “The most important point here is why GIC is doing this.

“Singapore is an RMB clearing centre and the country is pulling in RMB liquidity, so renminbi is sloshing around the country. As a result, they need to have the corresponding China exposure – and RQFII is far more flexible than QFII.

“This is a great step forward as Singapore is racking up serious exposure and using all the mechanisms to do it. This is concrete evidence of what a reserve currency looks like.”

AsianInvestor had learned this week that CSRC was about to announce it had awarded an RQFII licence to a sovereign wealth fund. Several sources initially named the Qatar Investment Authority (QIA). When approached, QIA declined to comment, although stopped short of denying it.

But it turned out to be GIC, which recently won two Institutional Excellence awards from AsianInvestor, both as a sovereign wealth fund and for its investment capabilities.

GIC’s portfolio has returned 7% per annum in US dollar terms over the past 10 years.

CSRC also announced last night that nine other organisations had been awarded RQFII licences. They are: UBS Hana Asset Management; CSAM Asset Management; BEA Union Investment Management; Generali Investments Asia; Neuberger Berman Singapore; Truston Asset Management; Daishin Asset Management; Samsung Asset Management; and Korea Investment Management.

What it shows is that five of these awards go to Korean asset managers. That takes the total number of Korean RQFII licence holders to 11, the first of which went to Shinhan BNP Paribas Asset Management in October last year. AsianInvestor has previously reported about South Korea's recent RQFII fever.

Beijing handed Rmb80 billion in RQFII quota to South Korea in July last year. There are now 13 Singaporean incorporated entities with RQFII permits, 11 Korean companies, seven UK firms and two from France.

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