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.