PGI to invest US150mn QFII quota in A-shares
29 August 2012
News, Asia, China
Principal Global Investors (PGI) has been approved for a US$150 million quota as a qualified foreign institutional investor (QFII) by China’s State Administration of Foreign Exchange (SAFE), the firm announced on Tuesday (August 28).
The company revealed the $150 million quota will be directly invested into the China’s A-share markets. The capability will be offered as a Qualifying Investor Fund (QIF) domiciled in Dublin, Ireland that will be available to all qualifying non-US institutional investors.
Tony Chu, a portfolio manager with PGI, told Asia Asset Management that this was the first time the firm had participated in the QFII scheme and says PGI will bring international experience to China. “It will also offer us a lot of opportunities from a stock picking perspective,” he said.
Mr. Chu noted that PGI intends to draw down the quota over a six-month horizon. “We’ve gathered a good amount of interest from our clients,” he added. “The fund may be invested earlier if it reaches a comfortable limit within the six month period, but this is dependent on market conditions.”
According to Mr. Chu, the bearish A-share market will turn around by March next year due to the change in Chinese leadership. “We can then invest the seed monies in the market to capture the rebound,” he remarked.
Jim McCaughan, CEO of PGI, said: “Being able to invest directly in the China A-share markets is a valuable and highly sought-after privilege. We are pleased to have developed a pooled fund that will provide clients a means to participate in one of the fastest-growing economies in the world. Despite the recent slowdown in growth, China continues to be an area of increasing focus and opportunity for sophisticated institutional investors.”
The firm’s China strategy is supported through its regional headquarters in Singapore, a regional office in Hong Kong, the global headquarters in Des Moines, Iowa, and coordinated through a representative office in Beijing. The investment team responsible for the capability is located in Hong Kong, Singapore and the US.
PGI will engage CCB-PAM as a consultant in order to benefit from its knowledge of evolving macro-economic news and political events, and the potential impact on the capital markets. This engagement does not impact the investment decision-making process of either firm.
Mr. Chu added, “For those investors fortunate enough to access them, the China A-share markets currently offer one of the most attractive investing opportunities in the world. Even with the recent deceleration, China’s GDP growth is still among the strongest in the world, and is now showing signs of stabilising. In fact, temporary weakness should be viewed as a good opportunity for long-term oriented institutional investors to enter the China A-share markets. The A-share markets also provide a diverse and rich opportunity set not available to most global investors through the Hong Kong and offshore listed markets.”
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