Ireland secures €6.8bn investment quota from China
Ireland has been granted a RMB50bn (€6.8bn) investment quota by the
Bank of China under the country’s Renminbi Qualified Foreign Institutional
Investor (RQFII) programme.
The quota will allow Irish-domiciled funds to purchase
securities in local Chinese markets using renminbi as the currency.
The announcement follows the Irish government’s decision to
engage with Chinese authorities regarding the provision of such a quota.
“The decision by Chinese authorities to allocate an RQFII
quota to Ireland will serve to further support the economic and financial
linkages between Ireland and China,” said Philip Lane, governor of the Central
Bank of Ireland.
With regards to the process for asset managers, Pat Lardner,
chief executive of Irish Funds, explained to Global Investor/ISF:
“To enter China’s stock market, RQFII applicants are subject
to approvals by the China Securities Regulatory Commission (CSRC) and State
Administration for Foreign Exchange (SAFE). They typically do this with the
assistance of their custodian.”
Asset managers can start the process immediately. Lardner
added: “We understand that it takes around two to three months for RQFII license
approval by the CSRC, and another one to two months for RQFII quota approval/filling
by the SAFE.”
Further, the Central Bank of Ireland is now able to accept
applications from Irish domiciled UCITS and AIFS to invest through the
Shenzhen-Hong Kong Stock Connect programme. These asset managers therefore can
access the Chinese market through the Irish central bank, as opposed to
liaising with China directly.
This marks the latest addition to the existing
Hong-Kong-Shanghai Stock Connect which Irish funds were granted access to in
2015.
The RQFII quota and the Shenzhen-Hong Kong Stock Connect
programme are both “important routes into the market,” according to Lardner.
He added: “Stock Connect operates at a market level where
flow is not allocated to individual participants while RQFII is a quota system
where individual firms are allocated quota.”
When deciding over which method to use over the other,
Lardner explains: “RQFII can invest in all of the listed stocks in both Shanghai
and Shenzhen stock markets, and also can participate in IPO, right issues and all
the corporate action events.”
He added: “Furthermore, RQFII can invest in mutual funds,
SMA, ABS, bonds, and index futures etc.”
The two developments will strengthen Ireland’s position as
the third largest global funds centre, while the European location of choice
for ETFs will also be bolstered in advance of possible index inclusions for
Chinese shares.
“As the home of 4.9% of global fund assets and 14.6% of
European fund assets Ireland will continue to provide vital connections between
managers and investors from around the globe,” said Lardner.
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