Veritas – China and its renminbi: the flavour of this post-summer season

Forget the euro and its eurozone. Investors have come back from the summer break with renewed interest for Chinese investments.

Fresh appetite that banks and asset managers are trying to satisfy with a broad range of new products and services, in most cases tailored to the needs of local European markets.

As in the case of Invesco, which increased this week its offering to Italian retail clients with the launch of the Invesco Renminbi Fixed Income fund.

According to Giuliano D’Acunti, head of retail distribution for Italy at the company, the renminbi fund will be particularly welcome by the market.

Since the first Dim Sum corporate bond was issued in 2010, this bond universe has grown to include the full range of traditional bond issuers, including financials, infrastructure, property, as well as retail and growth expectations are strong.

“The Dim Sum market in Hong Kong is attracting growing numbers of Chinese and foreign issuers and investors, and enjoying strong support from the Chinese government,” said Frankie Tai, associate director and head of Hong Kong fixed income at Invesco.

The size of the market and its potential is reflected in assets allocated to renminbi products.

Shortly after Invesco launched the new fund, global index provider FTSE Group reported that FTSE China A50 Renminbi qualified foreign institutional investors (RQFII) ETF from CSOP Asset Management has become the largest RQFII ETF, with $771.1m assets under management.

The initial RQFII quota of 5bn renminbi was allocated on August 28, and fully taken up on the same day.

CSOP Asset Management Limited is the Hong Kong incorporated subsidiary of China Southern Asset Management, one of the top five asset managers in China.

“This launch has been more successful than anticipated and demonstrates the continuing rapid growth in international demand for China-related investments. At the same time it accelerated the pace of the internationalisation of the renminbi,” said Ding Chen, chief executive at CSOP.

Again this week, S&P Dow Jones Indices and Deutsche Bank have co-branded the Offshore renminbi bond index ‘S&P-DB ORBIT Index’ which offers a benchmark of the fast growing offshore renminbi (RMB) denominated fixed income market.

“The offshore RMB bond market continues to grow as the bonds are popular vehicles among offshore investors looking to gain exposure to both the yuan and debt markets in China,” said JR Rieger, vice president of fixed income indices at S&P Dow Jones Indices.

Vishal Goenka, head of Asia local currency credit trading for Deutsche Bank added: “The offshore RMB bond market has developed considerably over the past year, with a growing range of maturities and continued diversification in issuer names. As the market continues to deepen and attracts more sophisticated investors, transparent and independent benchmarking becomes increasingly important. The S&P-DB ORBIT Index joint venture will continue to offer investors an invaluable measure for offshore RMB bond market performance.”

The news came as derivatives marketplace CME Group expanded its suite of Chinese renminbi products to include Deliverable renminbi (CNH) futures.

According to what released by the company, these products will be launched in the coming months and will be allocated to the International monetary market division.

“The renminbi market has grown significantly during the past two years, and is highly active both during as well as outside of Asian trading hours. As the Renminbi continues to internationalize, it will become increasingly important to provide global access to these products,” said Derek Sammann, CME group senior managing director for interest rates and FX products.

Statements from different companies which shared a concept: the renminbi market has been growing at a faster pace than expected, despite trading limits still in place.

China has become the flavour of the post-summer season, and more initiatives in this space are likely to be announced over the rest of the month.

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