Asset managers in Singapore are in no hurry to obtain renminbi qualified foreign institutional investor (RQFII) quota, judging by comments from the CEO of local fund house Lion Global Investors.
For one thing, local firms are not speculating on the likely amount of RQFII quota, says Gerard Lee. “This is more important for MAS [the Monetary Authority of Singapore] than players on the ground.”
RQFII quota was received in both London and Singapore with little fanfare as far as asset managers are concerned, he adds. “Yes, people here want [RQFII quota], but no one needs it tomorrow.”
A major reason for this is the market environment and level of uncertainty. For example, China's A-share market has been in the doldrums in recent years. “But I bet if the A-shares market were in a bull phase, the feeling on the ground would be very different,” says Lee.
It's a similar story for fixed income. With regard to renminbi bonds, "with interest rates globally on the rise and taper talks in the US, nobody is in a hurry to launch RMB fixed income products", he argues.
Lee's “best guess” is that Singaporean asset managers will apply for licences and quota within three-to-six months.
The process will follow the precedent in Hong Kong, he suggests, where approval and awarding of RQFII quota happened in quick succession – unlike with QFII, where it could take as much as two years from application of licence to the awarding of quota.
As for Lion Global's plans with regard to the RQFII scheme, Lee has three notable items on his radar screen: launching an A-shares unit trust or an RMB bond fund, or providing quota to one of the firm’s institutional clients for segregated mandates.
Launching RQFII exchange-traded funds is an interesting proposition, he notes, but Hong Kong arms of Chinese asset managers have an early-mover advantage here. So this is not a priority for Lee, especially since even retail investors in Singapore can trade Hong Kong-listed products via their local brokers.
With regard to the more sophisticated types of ETFs, Lee feels it’s too early to expect sector-focused RQFII ETFs, for instance, to take off. The A-share market is relatively immature, considering the small number of foreign investors buying A-shares directly, he notes, so for the time being offshore investors are more likely to allocate to plain-vanilla ETFs than to those focusing on a particular sector.
Asked if Singaporean fund managers were unhappy about London getting Rmb80 billion ($13.2 billion) in RQFII quota to the Lion City's Rmb50 billion, Lee is sanguine.
“It was not a sensitive issue. We know the centre of gravity for RQFII will be Hong Kong, so the size of quota for any other markets will be commensurate with the size of the financial centre.
“Given that London is a much bigger financial centre than Singapore, this is not something we lose sleep over,” he adds. “However, if Sydney, for example were given a bigger quota than Singapore, that would be a surprise.”