Offshore yuan funds set to go

PUBLISHED : Saturday, 07 January, 2012, 12:00am
UPDATED : Saturday, 07 January, 2012, 12:00am


The market is expecting a spate of offshore yuan fund products around Lunar New Year as 20 securities firms approved by the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme start to use their 18.9 billion yuan (HK$23 billion) quota.

Guotai Junan Securities, one of the second batch of 10 securities firms, yesterday said it would use its 900 million yuan RQFII quota to launch an offshore yuan fund shortly before or after the holiday.

Yuan Junping, one of the directors of Guotai Junan Securities, said over 90 per cent of the fund would be invested in bonds and other fixed-income products. The fund would mainly invest in second-grade bonds, he said, and it might increase its exposure to A-shares when market uncertainties receded.

The fund was expected to yield 4.5 per cent to 6 per cent a year, and the minimum investment would be 10,000 yuan. Investors would also have to pay a 1.2 per cent management fee.

Yuan said such products would be sought after due to expectations the yuan would continue to appreciate.

HFT Investment Management (HK), a joint venture between Haitong Securities and BNP Paribas, said it would launch an offshore yuan fund product shortly after Lunar New Year using its 1.1 billion yuan quota. The fund would mainly target retail investors.

At the end of last month, the State Administration of Foreign Exchange approved a 10.7 billion yuan quota for 10 investment firms in Hong Kong under the RQFII scheme. The 10 are CSOP Asset Management, China Asset Management (Hong Kong), Harvest Global Investments, Da Cheng International Asset Management, China Universal Asset Management (Hong Kong), HFT Investment Management (HK), Bosera Asset Management (International), HuaAn Asset Management (Hong Kong), Shenyin Wanguo (HK) and Essence International Financial Holdings.

Another 10 securities firms were granted 8.2 billion yuan. Mainland media identified the 10 as China International Capital, Guosen Securities, Everbright Securities, Guotai Junan Securities, Haitong Securities, GF Securities, China Merchants Securities, Citic Securities, Guoyuan Securities and Huatai Securities.

The RQFII scheme allows Hong Kong subsidiaries of mainland securities firms to buy mainland stocks and bonds with the offshore yuan, and allows Hong Kong investors to directly invest in A-shares and mainland bonds for the first time.

The scheme is regarded as a small but important milestone in internationalising the yuan, although it only includes mainland firms, and requires investors to put 80 per cent of yuan funds in fixed-income securities, and no more than 20 per cent in stocks and equity funds.

Representatives from the Hong Kong and Shanghai governments, financial regulators and exchanges met yesterday to discuss the possible joint promotion of investment in Shanghai's equity market through the RQFII scheme.