Safe smashes QFII record, more relaxations tipped

China's FX regulator awarded $2.75 billion in quota to nine foreign firms last month, with further liberalisation expected to be announced by the CSRC as early as this month.
Safe smashes QFII record, more relaxations tipped

China’s foreign exchange regulator smashed its monthly record for allocating QFII quota in October, in a sign that Beijing is ramping up its drive to direct money into its capital markets.

The State Administration of Foreign Exchange (Safe) granted a total of $2.75 billion to nine foreign financial institutions last month, breaking its previous high of $2.1 billion set this March. It made the announcement on its website yesterday.

Among them, on October 25 Safe granted $600 million in fresh QFII quota to the Government of Singapore Investment Corporation (GIC) and $700 million to Temasek Fullerton Alpha Investments.

At the same time Temasek subsidiary Fullerton Fund Management was awarded $250 million, with local media reporting it plans to establish an open-ended A-share fund for foreign investors.

It means both GIC and Temasek Fullerton Alpha have now hit Safe’s $1 billion cap for QFII quota, as have Norway’s central bank and the Hong Kong Monetary Authority.

China analysts see last month’s record-high quota as a sign that the China Securities Regulatory Commission (CSRC) is about to relax QFII regulations, including the cap on QFII quotas.

AsianInvestor has previously reported expectations the quota cap is set to be lifted for large global asset owners, creating a two-tier system in which long-term investors will gain premier access.

“It is possible that policymakers may give institutions that are long-term investors a special channel to apply for extra QFII quotas,” says Xiaoyu Ji, a QFII analyst at Shanghai-based consultancy Z-Ben Advisors.

Separate sources also indicate that further QFII liberalisations are about to be announced, perhaps as soon as this month. It comes after CSRC chairman Guo Shuqing announced plans to quadruple quotes for RQFII, the offshore cousin of QFII.

The other firms that were awarded QFII quotas last month were AMP Capital Investors, Société Générale, Barclays Bank, JP Morgan Chase Bank, Fubon Securities Investment Trust and Metzler Asset Management.

Separately, on October 26 BlackRock Asset Management North Asia was awarded a QFII licence, the second subsidiary of the world’s largest fund house to receive one after BlackRock Institutional Trust Company did in July 2011.

On the same date, New Silk Road Investment from Singapore, and US firms OrbiMed Advisors and Cutwater Investor Services also received QFII licences.

This year authorities have stepped up QFII deregulation to allow more overseas parties to access China’s onshore capital markets. Beijing more than doubled the permissible QFII quota limit to $80 billion this year, from $30 billion previously.

To date 192 foreign institutions have been granted QFII licences, with Safe having handed out a total of $33.6 billion in QFII quotas.

¬ Haymarket Media Limited. All rights reserved.