HKMA sets first in breaking QFII quota record

Hong Kong’s central bank became the first overseas institution to receive over $1 billion in total QFII quota from China's State Administration of Foreign Exchange (Safe).

The mainland's foreign exchange regulator removed the $1 billion cap on QFII holders last December, yet it took eight months for a foreign institution to exceed that amount.

The Hong Kong Monetary Authority (HKMA) was granted $500 million in qualified foreign institutional investor (QFII) quota in August’s batch of handouts. Combined with the $300 million and $700 million it obtained in 2011 and 2012, respectively, HKMA’s total QFII quota now stands at $1.5 billion.

No other QFII holders have surpassed $1 billion. Qatar Investment Authority reportedly applied for $5 billion in quota last year, but has yet to receive it.

Others with $1 billion overall include the Government of Singapore Investment Corporation, Abu Dhabi Investment Authority, Kuwait Investment Authority, Temasek Fullerton Alpha, Bank Negara Malaysia and Norway’s Norges Bank.

An HKMA spokeswoman tells AsianInvestor that “investing in RMB assets is a long-term investment [for the firm] and is part of its plan to diversify the portfolio of exchange funds”.

HKMA plans to invest the $500 million within the next six months. According to the firm’s annual report, RMB bond allocations have hitherto been run internally while equity investments are managed by external managers. The $1 billion is already fully invested, split between bonds and equities.

HKMA’s total assets stood at HK$2.8 trillion ($361 billion) as of June 30, with the firm reporting an investment loss of HK$6.1 billion in the first half of 2013. The loss is largely due to volatility in global equity and bond markets in the first half of the year. 

Most of the HKMA’s money is invested in debt securities (71.39%). Hong Kong-listed equities account for 4.77% while other equities total 11.02%. Some 9.49% is in cash and the remaining assets (3.32%) are in other assets. 

The central bank has lowered its exposure to bonds and increased investment in alternatives, including private equity, real estate and emerging market assets, but it avoids US dollar-denominated assets. 

HKMA expressed interest in investing in RMB assets earlier in July via interbank market bonds, according to other media reports.

Taiwanese insurers received large amounts of QFII quotas in August. China Life Insurance (Taiwan) and Cathay Life Insurance each obtained $150 million, while Taiwan Life Insurance was granted $100 million.

Other QFII recipients last month included UK-based Martin Currie Investment Management ($150 million); US fund manager PineBridge Investment ($150 million); fund house Hall Capital Partners ($100 million); Chinese sunshine manager Greenwoods Asset Management ($100 million); Eastspring Investment ($50 million); and the University of Notre Dame du Lac ($50 million).

Safe granted $1.5 billion in total QFII quota to 10 institutions in July, and $46.4 billion to 213 QFII holders since the programme was launched in 2003. 

Separately, Safe awarded Rmb5.9 billion ($964.6 million) in RQFII quota in August. CSOP received Rmb2 billion, while Ping An of China Asset Management was granted Rmb1 billion.

Cinda International Asset Management, Taiping Asset Management and BOC HK Asset Management each obtained Rmb800 million, and Industrial Securities (HK) received Rmb500 million.

Since the launch of the RQFII programme to the end of August, a total of Rmb127.8 billion has been granted to 39 RQFII holders.