State Street Global Advisors’ Asia ex-Japan head, Li Ting, has spoken of the firm’s plans to list an RQFII exchange-traded fund in Hong Kong and potentially also on other overseas bourses this year.
It comes after the Asian arm of the US fund house received a renminbi-denominated qualified foreign institutional investor (RQFII) licence from China’s securities regulator CSRC last month.
SSgA is now awaiting an RQFII quota, which can be allocated within two months by the State Administration of Foreign Exchange and typically ranges from Rmb1.5 billion ($247 million) to Rmb2 billion for an ETF.
Declining to reveal the amount of quota it has applied for, Li says “we will use the RQFII quota for an ETF” tracking the A-share market.
She notes that the firm plans to list the fund this year in Hong Kong, where there are currently 10 RQFII exchange-traded funds listed. SSgA’s global and Hong Kong product teams will develop the ETF, while the HK-based team will manage it.
SSgA Asia is also considering listing on other global exchanges, adds Li, but she declined to reveal which ones or on what timeline.
“We are exploring different opportunities and considering different markets [for listing],” she tells AsianInvestor. “We see tremendous interest in capturing local opportunities within China and are exploring different avenues to satisfy investor demand across various markets.”
Li confirms that for an overseas ETF listing the Asia arm would seek to work with its parent company in Boston.
That partnership would be based on the nascent sub-advisory model that allows foreign fund firms to effectively run an RQFII ETF on an international exchange after teaming up with an RQFII licence holder, who acts as sub-adviser.
At present there are four RQFII ETFs listed on international markets outside of Hong Kong via this sub-advisory model, and more are understood to be in the pipeline.
Deutsche Asset & Wealth Management and Harvest Global Investments jointly listed the first overseas RQFII ETF – db X-trackers Harvest CSI300 Index – in New York last November. Last month they launched a Ucits version on both the London and Frankfurt bourses.
UK fund house Source and Chinese partner CSOP, and US investment firm Van Eck Associates and ChinaAMC have also launched RQFII ETFs under the sub-adviser model in London and New York, respectively.
The China Securities Regulatory Commission issued a total of five RQFII licences this January. The four other firms to receive permits were Shanghai-based sunshine fund Greenwoods Asset Management’s Hong Kong arm; Société Générale’s China JV, Fortune SG Asset Management (Hong Kong); Hong Kong-based Enhanced Investment Products; and Macquarie Funds Management (Hong Kong).
Separately, the Monetary Authority of Macao was among those to receive a qualified foreign institutional investor (QFII) licence last month. Macau’s central bank had $16.2 billion in foreign exchange reserves as at the end of January.
Others to win QFII licences included Washington University, Stifel Nicolaus & Company, NTUC Income Insurance Co-operative, Invesco PowerShares Capital Management, European Reinsurance Company of Zurich and Nordea Investment Management.