* Can invest directly in stocks, other assets using yuan
* First UK asset manager to tap 80 bln yuan quota
* London is the first non-Asian route for such investment
By Simon Jessop and Tommy Wilkes
LONDON, Jan 7 (Reuters) - London’s push to become a leading foreign centre for yuan trade took a step forward on Tuesday after Britain’s Ashmore became the first Western asset manager to secure a licence to invest directly in China’s capital markets.
China’s cautious embrace of international cash resulted in a coup for Britain last October, when London became the sole non-Asian conduit for investors looking to buy stocks, bonds and funds in China using yuan.
Under the Renminbi Qualified Foreign Institutional Investor (RQFII) pilot programme, which was previously only available to Hong Kong firms, Beijing gave London-based asset managers the right to buy up to 80 billion yuan ($13.2 billion) of assets.
The share of the quota allocated to the mid-cap emerging market specialist, which manages $78.5 billion globally, has yet to be finalised. Other leading asset managers that may follow include FTSE 100-listed Schroders and Aberdeen Asset Management.
Ashmore Head of Research Jan Dehn said the licence would give its clients access to China’s fast-growing $4 trillion interbank bond market and its $3.5 trillion A-share equity market, both of which had previously been harder to reach.
“China has been one of the most compelling, yet difficult markets for investors to access,” said Dehn in a statement. But “the scale of the investment opportunity in China is enormous.”
The RQFII scheme, launched in December 2011, has also been expanded to Taiwan and Singapore and allows asset managers there to invest with fewer restrictions than during a previous programme (QFII), which had required them to have a two-year investing track record and more than $500 million in assets.
“The flexibility and reduced size of investment means that China’s A-shares are more available to some of the smaller institutional investors,” said Julian Mayo, investment director at emerging markets-focused fund manager Charlemagne Capital.
Unlike the QFII scheme, which gave banks, insurance companies, pension funds and securities firms access using U.S. dollars, Hong Kong dollars, euros, pounds or yen, the yuan-based RQFII is currently only open to asset managers.
A total of $48.5 billion in investments had been approved by October 2013 under 247 QFII licences, data from China Construction Bank showed, while 52 RQFII licences had been approved totalling 140 billion yuan.
Unlike the QFII scheme, the RQFII has no limit on the size of quota firms can apply for, has no lock-up period for money invested through public funds and allows for daily liquidity rather than weekly.
By cutting costs and making it easier and quicker for investors to get their money back, demand to invest in China is expected to jump. That will in turn confirm London’s leading position within the global industry, said Charlemagne’s Mayo.
“Other domiciles will no doubt follow, but they’re not going to catch up. London has the lead and is likely to retain that lead,” he said.
The UK represents around 36 percent of European assets under management and more than $1 trillion is held in UK-authorised funds, according to the Investment Management Association.