Across The BorderRecord number of QDII funds shows Chinese investors’ hunger for offshore stocks

A record number of qualified domestic institutional investor (QDII) funds are in the pipeline, reflecting mainland investors’ increasing enthusiasm for overseas equities ahead of the launch of the Shenzhen-Hong Kong stock connect scheme.

It is estimated that more than 30 QDII products will have hit the mainland market by the end of 2016, enabling investment in offshore stock exchanges. These are likely to raise at least 20 billion yuan of capital from Chinese investors, according to the Securities Times.

The fundraising spree was the result of heightened expectations of an imminent buying euphoria for Chinese companies listed abroad (H shares), particularly Hong Kong, and mounting worries about a weaker yuan.

“QDII funds showed signs of attracting mainland investors because it’s an efficient tool to help them hedge against currency volatility,” said Steven Jia, president of Daokun Asset Management. “It’s time for institutions to speed up fundraising for QDII funds.”

QDII allows mainland institutions such as mutual funds to raise capital from local investors in yuan before converting them into foreign currencies for purchasing overseas shares.

The institutions need to receive approval from the Chinese foreign-exchange regulator to make overseas investments, and the scheme is capped by a quota set by central government.