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Hopes for RQFII program to succeed but question remains
By Louise Ho |
December 20, 2011, Tuesday
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Print Edition
Print Edition
THE RMB Qualified Foreign Institutional Investors (RQFII) pilot program will be an important step to help offshore yuan flow back to the mainland, but a big question is whether demand for RQFII products will remain strong in the long run, market watchers said.
Hong Kong subsidiaries of mainland financial companies can raise offshore yuan in Hong Kong to invest in mainland securities up to 20 billion yuan (US$3.1 billion), according to the RQFII rules that China issued on Friday.
The scheme may promote the use of the yuan in cross-border trade and boost its internationalization.
Top asset management companies will have no difficulty in selling RQFII products when the program is expected to launch in the run-up to the Spring Festival which starts on January 23, said analysts.
The real question is whether such a momentum will be sustained. "A good start may not guarantee an acceptable fundraising follow-on," said investment research company Z-Ben Advisors in a note yesterday.
"There is persistent poor sentiment toward mainland markets. The demand for RQFII products can't yet be assumed," said the note.
However, Yi Xianrong, economist at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said the significance of the RQFII is not about the amount of investment.
"It is about an increasingly unimpeded flow of foreign capital from Hong Kong to the mainland," he was quoted by Economic Herald as saying yesterday
Speaking to the Wall Street Journal Frances Cheung, senior strategist at Credit Agricole CIB, said: "Although the initial impact (on the offshore yuan market) is limited given the small quota, that is the direction going forward."
Z-Ben predicted eight firms will be approved in the first round, including China's asset management heavyweights such as China Asset Management (HK), E-Fund (HK) or Harvest Global.
Additional licenses will be issued in 2012, it said.
The Hong Kong Securities and Futures Commission statistics show that up to April, 16 mainland securities firms and nine fund management companies have set up subsidiaries in Hong Kong.
Hong Kong subsidiaries of mainland financial companies can raise offshore yuan in Hong Kong to invest in mainland securities up to 20 billion yuan (US$3.1 billion), according to the RQFII rules that China issued on Friday.
The scheme may promote the use of the yuan in cross-border trade and boost its internationalization.
Top asset management companies will have no difficulty in selling RQFII products when the program is expected to launch in the run-up to the Spring Festival which starts on January 23, said analysts.
The real question is whether such a momentum will be sustained. "A good start may not guarantee an acceptable fundraising follow-on," said investment research company Z-Ben Advisors in a note yesterday.
"There is persistent poor sentiment toward mainland markets. The demand for RQFII products can't yet be assumed," said the note.
However, Yi Xianrong, economist at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said the significance of the RQFII is not about the amount of investment.
"It is about an increasingly unimpeded flow of foreign capital from Hong Kong to the mainland," he was quoted by Economic Herald as saying yesterday
Speaking to the Wall Street Journal Frances Cheung, senior strategist at Credit Agricole CIB, said: "Although the initial impact (on the offshore yuan market) is limited given the small quota, that is the direction going forward."
Z-Ben predicted eight firms will be approved in the first round, including China's asset management heavyweights such as China Asset Management (HK), E-Fund (HK) or Harvest Global.
Additional licenses will be issued in 2012, it said.
The Hong Kong Securities and Futures Commission statistics show that up to April, 16 mainland securities firms and nine fund management companies have set up subsidiaries in Hong Kong.
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