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Quotas:
China’s outbound investment programmes got a shot in the arm this week. For the first since March 2015, the State Administration of Foreign Exchange has given out QDII quotas. Safe’s data shows that $8.34 of new quotas were granted as of April 24.
Securities firms were the biggest winners, receiving $5.97bn of the quotas. Among foreign-Chinese joint ventures (JVs), Huatai-Pinebridge Investments got $280m new quotas, bringing the total of its quotas to $380m, whereas Penghua Fund Management got $300m new quotas, bringing its total to $900m.
There are several JVs on the list which are newcomers to the QDII scheme. Bank of Beijing Scotiabank Asset Management and AXA SPDB (Shanghai Pudong Development Bank) Managers got $200m and $230m of quotas, respectively, whereas Sun Life Everbright Life Insurance scooped up $120m.
Overall, insurance companies received $1.99bn of quotas, and trust companies got $380m. Banks did not get any new quotas. The bonanza came after Safe said on April 11 that it will review and reform the QDII programme, after president Xi Jinping vowed to open up China further at the Boao Forum for Asia earlier this month.
Safe has also expanded two other outbound programmes, qualified domestic limited partnership (QDLP) and qualified domestic investment enterprise ( QDIE ), bringing the aggregate quotas to $5bn for both, the regulator said in an April 24 statement.
The inbound qualified foreign institutional investor (QFII) programme had $100m of new quotas in April, all of which were allocated to CIFM Asset Management (Hong Kong), while UK-based Highclere International Investors became the sole recipient of Rmb690m ($108.8m) in new quotas for RMB QFII (RQFII), another inbound scheme. The size of the RQFII programme stands at Rmb614.9bn, after Insight Investment Management (Global), which had Rmb1.2bn of quotas, was taken off the list in April.
Policy:
China must be even more active than it has been in opening up the domestic market, the Chinese leadership concluded at an April 23 meeting.
The politburo meeting, which was presided by Xi, said the country will promote the healthy development of equity, bond, FX and real estate markets, according to a summary of the meeting published by Xinhua on Monday. It will also maintain a neutral monetary policy, and implement the major measures of liberalisation as soon as possible, according to the summary.
Bonds:
Investors traded Rmb162.58bn of onshore debt through Bond Connect in the first quarter, up 7.23% quarter-on-quarter, according to an April 23 statement by Bond Connect Company Limited (BCCL).
Offshore investors were behind 67.5% of these trades. They mostly traded bonds on Bond Connect are those with tenors of less than one year, one to three years, and seven to 10 years, said BCCL. Negotiable certificates of deposit, policy bank bonds and Chinese treasuries are their favourite purchases.
As of the end of the first quarter, there were 288 overseas institutional investors which have accessed onshore bonds through Bond Connect. The majority of these accounts, around 65%, are registered in Hong Kong. The rest came from almost 30 jurisdictions, ranging from Singapore and Taiwan, to the US, the UK, Germany and Luxembourg. About 50% of the accounts were overseas investment products, 25% are commercial banks, and 9% are securities companies.
Foreign investors held Rmb1.36tr of Chinese bonds as of March, according to CEIC data. There are Rmb76.9tr of bonds outstanding in the Chinese market as of April 27, Wind data shows.
BCCL is the joint venture between China Foreign Exchange Trade System and Hong Kong Exchanges and Clearing, which supports trading services on the bond link.
Bond Connect investors bought onshore residential mortgage-backed securities (RMBS) for the first time on April 16, according to an April 20 local media report. The Rmb7.95bn transaction was originated by Industrial Bank. The senior Rmb3.5bn tranche and the Rmb3.58bn mezzanine note priced at 4.86% and 5.25%, and will mature in December 2019 and September 2023, respectively.