China people & markets round-up: Bourses boast smooth A-share inclusion, investment quotas up on both sides, Aberdeen Standard Investments sets up RMB bond fund
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China people & markets round-up: Bourses boast smooth A-share inclusion, investment quotas up on both sides, Aberdeen Standard Investments sets up RMB bond fund

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Shanghai and Hong Kong’s stock exchanges say markets were in good form as the MSCI included A-shares in its benchmark, regulators approve new quotas for outbound and inbound investment schemes, and Aberdeen Standard Investments launches Luxembourg-based fund to tap onshore bonds.

  • The onshore stock market was stable on the last trading day before MSCI officially included A-shares in its emerging market (EM) index, the Shanghai Stock Exchange said in a May 31 statement. Thursday was the last day for investors to rebalance their portfolios before the inclusion kicked in on June 1 .

    A s much as Rmb11.27bn ($1.75bn) of capital flew into Shanghai-listed stocks on MSCI’s inclusion list through northbound Stock Connect on May 31, said the bourse . Those stocks together rose 0.13% in the last five minutes of trading on Thursday .

    Stoc k Connect investors bought just over Rmb2bn of these shares, which made up 18% of purchases during the trading day. The bourse also said it believes most global passive funds have now built their positions in the A-share market .

    Hon g Kong Exchanges and Clearing (HKEX) reported that northbound trading on Stock Connect — to both Shanghai and Shenzhen — hit Rmb34.69bn on Thursday, up 57% from the previous session. The daily turnover was the highest since the equity link’s launch in 2014.

    HKEX also noted that the number of Special Segregated Accounts (SPSAs) rose by 60% between March and May 25. SPSAs were launched by HKEX in 2015 to help minimise counterparty risk for institutional investors trading on Stock Connect.

  • In May, regulators approved $3.17bn of new quotas for China’s outbound investment programme, the qualified domestic institutional investor (QDII) scheme, according to figures released by the State Administration of Foreign Exchange (Safe) this week.

    Industrial and Commercial Bank of China was the only bank to get QDII quotas, taking home $500m. SWS MU Fund Management, which is 33% owned by Mitsubishi UFJ Trust and Banking Corporation, was the only foreign joint venture to get place on the list this month, scooping $200m of quotas. Securities firms got $1.8bn of new QDII quotas in total, whereas insurance firms bagged $610m.

    China also gave out Rmb1bn of quota for the inbound renminbi qualified foreign institutional investor (RQFII) programme in May. Malaysia’s CIMB-Principal Asset Management was the sole recipient, bringing the total of its RQFII quotas to Rmb1.6bn. The asset manager got its first batch of quotas in 2017, GlobalRMB data shows. The aggregate of RQFII quotas stood at Rmb615.9bn in May, according to Safe.

    Regulators did not release new qualified foreign institutional investor (QFII) quotas in May.

  • Aberdeen Standard Investments has launched a Luxembourg-domiciled fund targeting onshore Chinese bonds, the asset manager said in a May 31 press release. The fund will buy government bonds, highly-rated policy bank bonds, quasi-sovereign deals and investment grade corporate bonds, according to the statement.

    Craig Macdonald, global head fixed income at the UK asset manager, said the fund has come at a timely moment as index providers start including Chinese bonds. Bloomberg-Barclays announced in March that it plans to put Chinese government and policy bank bonds in its benchmark index in 2019.

    “There is already demand for Chinese bonds from global investors because of the relatively attractive yield and low correlation of the market to global peers,” he said. “That demand will increase significantly when Chinese bonds are included in broader market indices.”

    Hugh Young, head of Asia Pacific at Aberdeen Standard Investments, said the asset manager hopes to capture demand coming from onshore investors, too.

    “I am now looking forward to the launch of a similar bond fund available for eligible domestic Chinese investors later this year,” he said.

  • RMB deposits in Hong Kong stood at Rmb597.6bn in April, up 7.8% month-on-month, according to data released by the Hong Kong Monetary Authority on Thursday. Meanwhile, remittance of renminbi for cross-border trade settlement was Rmb326.4bn, down from Rmb335.6bn in March.

    The renminbi remained the sixth most used currency in global payments in April, according to Swift’s RMB tracker. It had a share of 1.66% in global payments. The value of RMB payments declined by 3.18%, at a slower than the international average, which was 5.84%.

  • ICBC has started a representative office in Astana, the bank said in a May 28 statement. The new branch, which opened its door in the capital of Kazakhstan on May 4, will help promote financial and economic co-operation between the country and China. It wants to help turn the city into a regional financial hub.


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