Schroders seeks bigger mainland stocks quota
British fund house Schroders has asked mainland regulators to increase its quota of A-share investment, in a vote of confidence for the mainland economy and its stock market.
Alan Brown, Schroders' chief investment officer, said the company met the regulators this week and 'shared the view with them'. Schroders' efforts to hike up its qualified foreign institutional investor (QFII) quota follows Beijing's decision this month to nearly triple the total permissible amount that foreign institutions can invest in mainland-listed shares.
'We would like to be able to get a larger amount and the flexibility to allocate our multiple funds in the longer term,' Brown told the South China Morning Post, adding that the regulators were 'heading in the right direction' by increasing the quota.
The A-share market is off-limits to foreign investors and only QFIIs are allowed to buy mainland equities, which are subject to an investment cap. Beijing has just raised the combined QFII quota from US$30 billion to US$80 billion as part of efforts to buoy the weak market.
Schroders currently has a US$300 million QFII quota. Brown would not reveal the exact size of the additional quota the firm was seeking.
The fund house is bullish on the mainland's economy and stocks. 'Chances of a soft landing are much greater than the risks of hard landing,' Brown said. 'We are not concerned about short-term volatility.'
The mainland market, after two years of sharp drops, is unlikely to see a big rally this year because of mounting worries about the major banks' potential non-performing loan problem, say mainland analysts.
Beijing also expects a slowdown this year amid weaker external demand and tighter measures in the domestic property sector.
But Schroders believes demand for A-share purchases will rise in the long-term.
The company launched a yuan bond fund in Hong Kong in October 2010, and it also owns 30 per cent of a Shanghai joint-venture asset-management firm, the Bank of Communications Schroder Fund Management, which was founded in 2005.
The number of initial public offerings expected this year in the A-share market, up from 282 last year - worth US$43.7 billion