(China Alert) China strategies and quota diverge

·Mega RQFII quotas are now a real option for China access
·The largest asset managers are set for increased competition
·Firms are readjusting exposure between QFII and RQFII

Update: Recent market volatility in China has led to differing R/QFII access strategies among global investors. On the one side, there are an increasing number of managers choosing to draw down their QFII quota (USD300m+ in January alone), but this is not entirely a one-directional trend. Data released this week showed a very noticeable outlier; Vanguard was provided with an additional RMB20bn in RQFII quota, bringing its total market access to RMB30bn. Irrespective of how the Chinese markets are behaving, the pioneer in passively-managed AUM has clearly set its sights on the China A-share market. To steal a quote, two roads have diverged in the yellow wood. What remains to be seen is whether Vanguard taking the path less travelled will make all the difference. It is, however, a choice that all global managers and asset owners will need to make throughout 2016.

Make no mistake, Vanguard is now the undisputed leader in R/QFII access at a combined RMB30bn (USD4.6bn) and unquestionably demonstrating the firm’s long term commitment to the A-share (and China) market. The quota itself was initially meant for…

If you would like to request access to the full China Alert along with more information of our client advisory platform please email us at: [email protected]