Institutional investors remain underweight in China assets and are looking to increase their exposure to the mainland, according to Cerulli Associates.
The Chinese authorities recognise this and have awarded Renminbi Qualified Foreign Institutional Investor (RQFII) quotas to Hong Kong, the UK, Singapore, France, South Korea, and Germany.
Passive, replication-style RQFII exchange-traded funds (ETFs) have so far represented a relatively safe entry point to the market for investors. But active RQFII funds have also emerged in recent months.
The global interest in China has prompted managers from outside the Greater China region to apply for RQFII licenses at the China Securities Regulatory Commission. Among the managers that have received RQFII licenses so far this year are BlackRock Consultants (UK), Nikko Asset Management, Schroder Investment Management, and State Street Global Advisors.
With China likely to develop its RQFII program further in its drive to internationalise the renminbi, Cerulli expects to see more managers applying for RQFII licenses as well as more RQFII quota being awarded. It will be useful for them to have some RQFII quota in the locker to help meet the expected demand for China exposure.
At present, the top 10 companies in terms of RQFII quotas awarded all hail from the Greater China region, led by CSOP Asset Management with RMB45.6 billion (USD7.4 billion) in accumulated quota.