More yuan products for investors

Chinese one-hundred yuan banknotes are arranged for a photograph in Tokyo, Japan, on Tuesday, Aug 11, 2015.
Chinese one-hundred yuan banknotes are arranged for a photograph in Tokyo, Japan, on Tuesday, Aug 11, 2015. PHOTO: BLOOMBERG

SINGAPORE - Asset managers here will be able to offer investors more yuan fund products under new cross- border initiatives announced yesterday.

The change involves a doubling of Singapore's quota under the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme from 50 billion yuan (S$11 billion) to 100 billion yuan.

The higher quota is "in response to the strong interest by Singapore-based asset managers and investors to invest in China. This larger quota will allow more fund managers in Singapore to offer investors a wider range of yuan fund products", said the Monetary Authority of Singapore (MAS) yesterday.

It added that the move will bring greater liquidity to China's capital markets and help broaden their investor base.

A larger quota means Singapore-based fund managers can invest more in A-shares, which are shares listed on the China market, giving them more choice in addition to investing in H-shares - Chinese shares listed in Hong Kong. Market players say A-shares have attracted higher premiums traditionally. Fund managers can also now invest in the China interbank bond market.

BOOSTING MARKET CONFIDENCE

By providing timely liquidity support to market participants, a stronger BCSA will help anchor market confidence as Singapore's yuan market continues to grow.

THE MONETARY AUTHORITY OF SINGAPORE

The initiative, which stemmed from Chinese President Xi Jinping's visit to Singapore last week, is a bid to strengthen cross-border yuan flows and "capital market connectivity" between China and Singapore.

HSBC Singapore chief executive Guy Harvey-Samuel noted that by June this year, Singapore had "the highest RQFII quota utilisation rate in the region, outside of Hong Kong".

Besides Suzhou and Tianjin, the channels for cross-border yuan flows have expanded to include Chongqing municipality. The MAS said Singapore-based banks will be allowed to lend yuan to Chongqing firms, while Chongqing-based companies may issue yuan bonds in Singapore and "fully repatriate the proceeds". This will boost cross-border yuan activity and further promote the yuan's internationalisation, said Mr Benjamin Quek, OCBC Bank's head of China business office.

MAS and the People's Bank of China will also renew and enhance a bilateral currency swap arrangement (BCSA) as the existing arrangement expires next March. MAS said: "By providing timely liquidity support to market participants, a stronger BCSA will help anchor market confidence as Singapore's yuan market continues to grow."

Head of transaction banking Goh Beng Kim at Standard Chartered Bank here said an effective arrangement will provide "greater certainty for yuan funding and encourage Singapore businesses to continue using yuan in cross-border flows".

MAS managing director Ravi Menon said: "In the next phase of our financial cooperation with China, we hope to replicate in the area of capital market development the success we have had in building the yuan ecosystem."

A version of this article appeared in the print edition of The Straits Times on November 10, 2015, with the headline 'More yuan products for investors'. Print Edition | Subscribe