JPMorgan Asset Management gears up for stronger global demand for Chinese stocks
Company secures additional investment quota from Chinese regulators
JPMorgan Asset Management has been granted an additional quota under the Renminbi Qualified Institutional Investor scheme, which allows foreign fund managers to invest in onshore yuan securities using offshore renminbi, expanding the global asset manager’s capacity to invest on the mainland amid growing investor interest in the Chinese A-share market.
While the [MSCI] inclusion itself is of a low percentage, it’s only going to grow
The additional capacity, amounting to 5 billion yuan (US$748 million), was approved by China’s foreign exchange control regulator last month, increasing JPMorgan Asset Management’s total quota to 6 billion yuan.
The company’s application for the additional quota came amid the inclusion of 226 Chinese large cap stocks in the MSCI Emerging Markets Index, tracked by US$1.9 trillion in global funds, which has created strong demand from foreign investors.
“Given the current levels of inclusion … it will not be a giant instant flood of money into A shares, as many institutions and investors with benchmark-aware strategies already have exposure in China. While the inclusion itself is of a low percentage, it’s only going to grow,” said Michael Falcon, the company’s chief executive for Asia-Pacific.
The A shares’ aggregate weight on the MSCI index will be at 0.78 per cent by September.
The company’s application for additional capacity under the scheme, one of many mechanisms through which China allows foreign investors to make portfolio investments in the onshore capital markets, coincides with its plan to increase the local research capabilities of its wholly foreign-owned enterprise unit. JPMorgan Asset Management is looking to build up its coverage of Chinese companies as foreign fund managers compete for what could amount to at least US$17 billion in new inflows into Chinese stocks.
