China quickening QFII and RQFII approval process

17 June 2014   Category: News, Asia, China, Global   By Derek Au

China’s financial authorities are pushing through quicker approvals of QFII and RQFII quotas in order to encourage more long-term capital inflows, a Mainland newspaper claimed, after indices provider MSCI opted against upgrading the country’s A-shares to emerging markets status.

China Business News reported that the China Securities Regulatory Commission (CSRC) has begun green lighting applications from foreign investors at a faster pace and stepping up efforts to resolve obstacles to tax collection.

The move comes just days after MSCI decided not to incorporate A-shares into the MSCI China and MSCI Emerging Markets indexes, dashing hopes for potentially billions of dollars of investment from tracker funds into local equity markets.

Alex Lee, chief marketing officer at BEA Union Investment, told Asia Asset Management that the snub from MSCI “will affect the extent of the opening of [China’s] capital account”. Mr. Lee added that he expected more of the new QFII and RQFII quotas to be invested in bonds, due to the recent underperformance of A-shares compared to developed market stocks.

Victor Lau, sales director, product and marketing, Da Cheng International Asset Management, added that the shorter approval time might also be correlated to increased demand from investors. “Does speeding up the approval time have a direct relation with an increase in demand? We think it does,” he said.

Up to the end of March this year, China’s State Administration of Foreign Exchange (SAFE) had granted a total of 70 billion RMB (US$11.25 billion) in RQFII quotas to the subsidiaries of 24 Mainland institutions.