Taipei-based Fubon Asset Management plans to capitalise on recent moves to open and link the Taiwanese market to that of mainland China. These include applying for more QFII quota and launching new bond and equity product.
The firm is preparing a new bond fund after China's central bank unveiled rules late last month formally allowing qualified foreign institutional investors (QFIIs) to access the mainland interbank bond market, which accounts for 95% of onshore bonds. QFIIs must now submit applications to the People's Bank of China for approval.
This follows the China Securities Regulatory Commission's announcement in July that QFII holders would be able to participate in the interbank bond market.
Henry Lin, general manager of Fubon AM, says the firm will apply for additional QFII quota – some of which it will use for its SSE 180 exchange-traded fund and the remainder for the new bond fund. He did not specify the quota amount that Fubon will seek, apart from to say “as much as possible”.
In the wake of the January announcement that the renminbi-QFII scheme would be extended to Taiwan, Lin tells AsianInvestor: “If we are granted RQFII quota, we plan to add an RMB trading counter for our SSE 180 ETF.” The remainder will be used for a new actively managed equity fund.
Fubon, one of the biggest providers of RMB products in Taiwan, also intends to add to its range of dim-sum bond products for retail investors, with Hong Kong-based BOCHK Asset Management as its partner and adviser.
The CSRC has allocated an initial Rmb100 billion ($16 billion) quota to Taiwan, and the pilot RQFII 2 programme will include both institutional and retail investors.
Lin, also chairman of the Securities Investment Trust and Consulting Association, says institutional investors such as pension funds and insurers are interested in QFII and RQFII products, because the interest rate in Taiwan is relatively low.
Currently, the one-year time-deposit rate is 1.36% (the average from the five biggest banks), and the average benchmark interest rate is 2.88%, according to Taiwan’s central bank.
Fubon launched the first QFII exchange-traded fund in Taiwan, the SSE180 ETF, in October 2011 using its first quota of $100 million. It also used its second quota of $150 million for the same product.
The total AUM is mostly accounted for by domestic institutional investors, although one-third later went to individual investors in the secondary market.