Issue of RQFII guidelines expected by year end

The long-awaited RMB qualified foreign institutional investor (RQFII) guidelines are expected to be issued towards the end of this month, following their inclusion this week in the Mainland and Hong Kong Closer Economic Partnership Arrangement.

The relevant part of Cepa, supplement VIII, was signed on Tuesday and will come into force on April 1 next year. KC Chan, Hong Kong secretary for financial services and the treasury, says preparation work for the guidelines has been completed and is awaiting an announcement by Beijing.

There is widespread market speculation that the RQFII guidelines and the first batch of licensees will be announced during the week commencing December 25 (which is not a public holiday in mainland China).

Several RFQII applicant firms recently received notice from the China Securities Regulatory Commission (CSRC) to remind them to “be around” during the week of the Christmas holiday, says an AsianInvestor source from a Chinese fund management company (FMC).

“I cannot imagine any better window to announce the news other than the Christmas holiday, as it would have less impact on the market as many overseas markets will be closed,” says the executive, who asked not to be named.

Some Chinese fund houses have been ready to launch RQFII funds for quite a while. In August, Pieter Oyens, regional head of business development at Harvest Global Investments, told AsianInvestor that his firm has completed all the stages for quota application required by the CSRC and for authorised funds by Hong Kong's Securities and Futures Commission (SFC).

The CSRC grants the RQFII licence, the State Administration of Foreign Exchange approves the quota, the People’s Bank of China (the central bank) formulates relevant measures of administration, and the SFC approves product plans.

Banks are also preparing for RQFII product launches. Yap Cheeping, head of securities and fund services (SFS) at Citi in Hong Kong, says: “Our consumer bank had already signed up several Chinese houses for RQFII products. For Citi’s SFS, we are implementing two mandates where we act as trustee, custodian and administrator for RQFII funds.”

Under the RQFII programme, an initial quota of Rmb20 billion ($3.1 billion) will be shared among Hong Kong subsidiaries of Chinese securities companies to invest back into the mainland's onshore securities market. RQFII funds, mostly targeting retail investors, will be 80% invested in bonds and 20% in equities.