Khazanah handed QFII quota in record time
China’s foreign exchange regulator has granted a QFII quota to Malaysian sovereign wealth fund Khazanah Nasional just a month after it was awarded its licence in a batch of new approvals totalling $700 million.
The Malaysian government’s investment arm received $250 million on April 10, the State Administration of Foreign Exchange (Safe) noted on its website this week. That comes after Khazanah was handed its QFII licence by the CSRC just 33 days beforehand on March 7.
Overall it was one of five institutions awarded new QFII quotas this month. The others were the Hospital Authority Provident Fund Scheme ($100 million), HI Asset Management ($100 million), Cathay Life Insurance ($150 million) and Neuberger Berman Europe ($100 million).
Safe also revealed it had revoked a $75 million quota awarded to Prudential Asset Management (Korea) in May 2008 on account of the firm having merged with Hanhwa Investment Trust Management last year. Hanwha IMT had just been given a $68 million QFII quota on March 15.
Further, Safe reduced GE Asset Management’s quota by $50 million on March 27 to $300 million, without elaborating.
As of April 16, there were a total of 133 QFIIs with a total quota of just over $25 billion.
Sovereign asset owners such as Khazanah have tended to receive the largest quotas from Safe. This year the three QFIIs to have received $300 million each are Bank of Thailand, Kuwait Investment Authority and Bank of Korea.
Given that QFII investors are required to fund their investments within six months of receiving a quota, licence holders have been wasting no time in terms of making preparation.
In an interview with AsianInvestor last month, Heman Wong, executive director of the Hospital Authority Provident Fund Scheme, revealed it had sent out its RFP for onshore Chinese securities management in early March – six weeks before it received a quota.
With what he described as “a very humble” headcount of 13, Wong said the Hospital Authority was having to do its own due diligence on Chinese fund firms on account of the industry not being well covered by consultants at this time.
He told AsianInvstor he was striving to complete the due diligence process within three months in order to do the funding properly before expiry of the six-month limit.
The Hospital Authority Provident Fund Scheme, which manages $5.5 billion in pension money for 33,000 members, received its QFII licence on January 31, meaning it had to wait less than two-and-a-half months for its quota – compared to up to six months as recently as last year.
But over the same period the quota size hasn’t increased that much for QFII licence holders, with most asset managers still receiving $100 million and life insurers slightly more.
A source from Fubon Life Insurance, which is awaiting a QFII quota after being awarded a licence on March 1, suggests that because the sum it is likely to receive will be less than $200 million it intends to give a heavier weighting to equities (50-60%) over bonds given its capital gains potential.
The source indicated that if and when it receives a bigger quota, it will increase its fixed income weighting at that time to be more in line with insurance companies’ asset allocation strategy.