China money manager applies for new quota for yuan product in London
HONG KONG Jan 27 (Reuters) - Chinese asset management firm CSOP said it has started applying for new quotas for its newly-listed renminbi exchange-traded fund (ETF) in London due to strong demand, signaling international investors' growing appetite for yuan assets.
The fund, which tracks the FTSE China A50 Index to allow investors to have exposure to the top 50 companies in mainland China, has exhausted 1.45 billion yuan ($239.60 million) of its 1.5 billion yuan quota, only two weeks after its launch.
It is the first Renminbi Qualified Foreign Institutional Investor (RQFII) exchange traded fund (ETF) available in London, after the firm listed another yuan ETF in Tokyo tracking CES China A80 Index a year earlier.
"We've seen a lot of demand from institutional investors in Europe, especially insurance companies and family offices," said Ding Chen, chief executive officer at CSOP Asset Management, which managed $5.7 billion assets as of end-2013.
"We did a series of roadshows in Europe recently and found that interest in yuan products is not only from Germany and Switzerland where investment demand is usually strong, but also from countries like Itlay," Ding added.
Ding said the firm is also considering capitalising on London's 80 billion yuan RQFII quota for the fund, whose manager is London-based Source.
The RQFII scheme, launched in 2011, allows financial institutions to use offshore RMB to invest in the Chinese mainland securities markets, including stocks, bonds, and money market instruments.
As of Dec. 25, a total of 157.5 billion yuan of quotas had been approved for 52 RQFII licences under the 270 billion yuan quota granted to Hong Kong.
Britain's Ashmore also kicked off London's quota earlier this month.
As China's currency outperforms in the region, global investors have started to add yuan assets to their portfolios to diversify risks.
Ding said the company is studying whether to list more yuan products in European cities, such as Frankfurt, to meet such needs.
CSOP is not alone in expanding its yuan business roadmap. China's Harvest Global Investments partnered with Deutsche Asset & Wealth Management in December and listed the first yuan ETF in the United States.
Offshore ETFs focused on the A-share market are among the few options for foreigners to access mainland markets.
ETFs offered under RQFII are usually preferred more by investors than those under QFII launched in 2002, given lower counterparty risk and tracking error.
However, Ding noted foreign investors are not without concerns about China, particularly its shadow banking problems and its progress in opening up domestic markets.