A recent rise in Chinese investor demand for foreign exposure, sparked by recent renminbi depreciation, has led mainland fund houses to suspend subscriptions to QDII products or switch to using Stock Connect to gain Hong Kong equity exposure.

Managers of products under the qualified domestic institutional investor (QDII) scheme – which allows Chinese institutions to buy foreign traditional assets – were already under pressure due to a shortage of QDII quota. The latest mainland market turbulence has exacerbated the problem.

Shenzhen-based Bosera Funds closed subscriptions for its five QDII funds on Tuesday (January 12), following significant inflows. The firm had $600 million in QDII quota as of the end of 2015.

Fortune-SG, an asset management joint venture between Lyxor and Hwabao Trust, said it only had Rmb30 million ($4.6 million) left of its $1.05 billion in QDII quota. That is mainly because of significant flows into its S&P oil and gas equity fund in recent weeks.

Other mainland fund houses, such as China AMC, GF Fund and Guotai Fund, this month set daily limits for large subscriptions

Beijing-based Yinhua Fund is an exceptional case. The firm’s four QDII funds had a total AUM of more than double its $300 million quota as of the end of 2014, according to Galaxy Securities. The firm achieved this by releasing the QDII quota used for its Hang Seng China Enterprise index structured fund by instead getting that exposure through the Stock Connect since April 28 last year.

Indeed, utilisation of the southbound trading link surged to 46% of the total permitted quota on Wednesday (January 13) from 28% on November 28, amid renminbi weakness and A-share volatility in recent weeks.

Since the start of the year RMB devaluation and inflows, particularly into global high-yield bonds funds, have put more pressure on QDII managers, said Qiu Wei, deputy manager of GF Fund’s international business, cited by local media.

China’s State Administration of Foreign Exchange has not approved any new QDII quota since March. Hence the $31.1 billion in QDII quota held by 34 mainland fund houses has remained static for the past nine months.

Key QDII managers, such as China AMC, China Southern and E Fund, were the first to face a quota shortage, due to demand for Hong Kong equity exposure amid the Hang Seng stock rally in April last year, as reported

Chinese asset owners such as insurers are also having to be more strategic in how they use their outbound investment quotas, as the suspension is limiting their ability to add foreign allocations.