Two Bangkok-based fund houses have voiced different views on Thailand receiving Rmb50 billion ($7.65 billion) of quota under China’s RQFII scheme, which enables domestic investors to buy Chinese securities directly.
Krung Thai Asset Management (KTAM) feels it is a good opportunity for Thai investors to diversify into the offshore market and plans to apply for an renminbi qualified foreign institutional investor (RQFII) licence and quota. The firm said it hadn’t decided when to do so, as China only handed quota to Thailand in mid-December.
Tisco Asset Management, on the other hand, is less keen. Saharat Chudsuwan, head of marketing for mutual and private funds, said the firm did not plan to apply for an RQFII licence as it lacked the expertise to invest directly in Chinese assets.
It would not be worth building capabilities in this area, added Saharat, because Tisco AM’s clients already invest in China either via exchange-traded funds (ETFs) or funds of active funds.
However, Peerapong Kitjakarn, KTAM’s senior assistant vice president for alternative investments, sees demand from Thai investors to invest directly in Chinese stocks rather than via ETFs or feeder structures.
The five-strong alternative investments department oversees all non-domestic products and would need to expand if it were to proceed with launching an RQFII fund, noted Peerapong. If so, KTAM would likely set up a Chinese equity product, but would need to find a local mainland partner or adviser to help it manage the fund.
Peerapong said KTAM would assess the viability of going ahead, taking into account factors such as demand from investors, whether Chinese asset valuations are attractive enough, details of the application process and conditions on retaining quota.
Thai investors were keen on the Chinese market in the first half of last year, noted Peerapong, but demand fell in the second half following the mainland stock crash in June.
KTAM currently invests in China directly through US dollar deposits with Chinese banks and through ETF funds listed in Hong Kong. Creating an RQFII fund would give the company control of the portfolio and management of currency volatility, as opposed to investing in China’s capital market through a feeder fund.
KTAM’s foreign investment fund (FIF) assets have grown 30% over the past two years to $250 million. The firm plans to launch more FIFs this year, starting with an India equity fund at the end of January, as it favours the country’s growth story.
The firm sees opportunities for local investors in foreign assets because of limited opportunities in the domestic market, said Peerapong. “We prefer equities over fixed income in foreign investments, and developed markets over emerging markets. In emerging markets, we are selective.”
Thailand's Rmb50 billion in RQFII quota is the same amount as was initially awarded to Australia, Canada, Singapore and Switzerland. Singapore has since received a further Rmb50 billion. The other countries with RQFII quota are France, Germany, Hong Kong, South Korea and the UK.