A More Global Yuan (2)

Thirsty market

This is the third and largest expansion of the RQFII.

The CSRC and SAFE jointly launched the RQFII system at the end of 2011 with an initial quota of 20 billion yuan ($3.18 billion). Qualified fund management companies and securities companies are allowed to issue renminbi-denominated funds and invest them into the mainland capital market.

Most of the first batch of RQFII products were launched at the end of March and were mainly invested into the bond market. Benefiting from relaxed money supplies and narrowing interest difference in the mainland market, these RQFII products have performed well.

Public figures from Hong Kong show that the average growth rate for the net value of the first batch of RQFII products is 1.2 percent.

China raised the quota by 50 billion yuan ($7.95 billion) in April, capping it at 70 billion yuan ($11.13 billion).

Different from the first batch, the newly increased quota can be used to develop Exchange Traded Funds (ETFs) that are invested in the stock index of the A-share market. The decision was widely welcomed for satisfying the demand of institutional investors to track the performance of stocks in the mainland market.

In July, the ChinaAMC CSI 300 Index ETF, which China Asset Management (Hong Kong) Limited (CAMHK) listed, was in high demand upon its availability on July 17. Later debuted RQFII products, such as CSOP A50 ETF, EFUND CSI100 ETF and HGI MSCI CN A, were also highly sought after.

The approved quotas for the CSOP A50 ETF and the EFUND CSI100 ETF are 5 billion yuan ($794.91 million) and 2 billion yuan ($317.97 million) respectively. Since the capital raised during their initial public offerings had already reached the upper limit, both funds closed for purchase after their debut.

On August 29, the SAFE raised the quota by 3 billion yuan ($46.95 million) for the EFUND CSI100 ETF, helping it open for purchase. On September 7, the CSOP A50 ETF also saw its quota rise by 2 billion yuan, which was soon digested by the market. On October 24, the CSOP A50 ETF suspended purchase again because its 7-billion-yuan ($1.11 billion) quota had been used up.

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