Affin Hwang eyes China bonds as Malaysia wins RQFII quota

Nov 24, 2015

The Kuala Lumpur-based fund house said it planned to build China bond capabilities, after Malaysia was awarded renminbi qualified foreign institutional investor quota this week.

Affin Hwang eyes China bonds as Malaysia wins RQFII quota

Malaysia’s Affin Hwang Asset Management has said it plans to enter China’s cross-border RQFII programme and build mainland bond investment capabilities, after the country this week received Rmb50 billion ($7.8 billion) in quota under the scheme.

The fund house does not currently have the resources to manage Chinese onshore bonds, but it aims to put them in place, said Chan Ai Mei, chief marketing officer. Affin Hwang will also consider applying for an RQFII licence and quota next year, through which it will be able to access the Chinese market, but does not have an immediate plan.

“We believe the renminbi will become an important global currency, [and] we actually plan to offer opportunities for local investors to tap this asset,” said Chan. She sees appetite for the currency among local investors.

The extension of the RMB qualified foreign institutional investor (RQFII) scheme to Malaysia was announced on Monday, at the end of Chinese prime minister Li Keqiang’s visit to the country. Kuala Lumpur thus becomes the latest renminbi hub, and Bank of China will be the renminbi clearing bank there.

The move further reflects the mainland’s desire to have its currency included in the International Monetary Fund’s special drawing rights (SDR) basket of currencies, and follows the award of additional RQFII quota to Korea and Singapore earlier this month. The People’s Bank of China doubled Singapore’s quotas to Rmb100 billion and raised South Korea’s quota by 50% to Rmb120 billion, as reported.

The Chinese central bank has also expanded the RQFII scheme to Switzerland, Luxembourg, Chile and Hungary this year, with each country receiving Rmb50 billion in quota. Overall, the scheme has granted a total of Rmb1.1 trillion to overseas investors in 14 countries.

RQFII is being expanded ahead of the IMF’s review of its SDR currency basket, which will be discussed by the fund's executive board on November 30. IMF head Christine Lagarde voiced her support for renminbi inclusion on November 16.