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Local financial institutions given option to invest in renminbi products

Eligible Singapore financial institutions can now apply for approval to offer renminbi investment products and use offshore yuan to trade in Chinese stocks and bonds.

SINGAPORE: Eligible Singapore financial institutions can now apply for approval to offer renminbi investment products and use offshore yuan to trade in Chinese stocks and bonds.

In a statement on Friday, the Monetary Authority of Singapore (MAS) said all Singapore-incorporated fund management firms approved by the authorities may apply for the Renminbi Qualified Foreign Institutional Investor (RQFII) licence.

Industry players expect the scheme to receive a strong response from the industry and new related yuan products to be launched in Singapore within the year. 

Singapore is the third centre outside mainland China allowed to use the currency to trade in Chinese stocks and bonds, joining the likes of Hong Kong and London.

Last October, Singapore was allocated an aggregate quota worth 50 billion yuan under China's RQFII programme. 

This bolstered the city-state’s credentials as an offshore yuan hub and is set to allow local investors to access China's equity markets.

“For many years, foreign investors have struggled to have access to China A-Shares or China fixed income. Now with this RQFII scheme, many more investors will have access to the Chinese fixed income and equities market,” said Wong Kok Hoi, chief investment officer at APS Asset Management.

“For this RQFII scheme, we have submitted the application of US$300 million -- that would be our first application to RQFII." 

All Singapore-incorporated financial institutions approved by MAS to conduct fund management activities may apply for the licence. 

The applications are to be made to the China Securities Regulatory Commission (CSRC) via approved custodian banks.

MAS said the introduction of the RQFII scheme in Singapore is expected to play a key role in developing a vibrant yuan ecosystem here.

It added that the scheme will spur the development of a broader range of yuan products and services to meet investment needs. 

Fund managers say the scheme will help boost the fund management industry in Singapore.

Rajeev De Mello, head of Asian fixed income at Schroders, said: “Being able to access the Chinese domestic market will be very important (not only) for funds which are managed in Singapore for Singaporean institutions and Singaporean private clients, but also for those in the region which go to Singapore for investments and… across the world because funds which are managed here (in Singapore) are often distributed not just in Asia, but in Europe, the US and Latin America."

In an email note, OCBC Bank's economist Tommy Xie said the move will also provide access to China's interbank bond market, the world's fourth largest debt market.

China's onshore market offers higher yields compared to the offshore bond market. 


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