Although Aberdeen is generally associated with equity investment, the firm acquired the Chinese license with fixed income in mind. The company said that although China’s currency markets are accessible to global investors through offshore non-deliverable currency forwards, this is not always the best way of taking advantage of the investment opportunities over the longer term.
“Having a quota to invest onshore clearly allows the investor to take a direct view on the underlying bonds and equities themselves and not just the Yuan,” Aberdeen said in a statement.
In a regional bond market, which can exceed ten countries (excluding Japan), China has the largest domestic market and now comprises almost 15% of the widely used Iboxx Asia ex-Japan local currency index.
Aberdeen sees China’s index share growing substantially in the years ahead as, in addition to government issuance, companies are being encouraged to diversify their borrowing away from bank debt.
The asset manager said it is more cautious about the use of QFII for regional equities, where its funds under management amount to US$52.1bn (€40.5bn). Aside from a handful of dual listed H and mainland A share stocks, where A shares may be cheaper, Aberdeen said it did not see immediate buying opportunities because of longstanding governance and quality concerns.
The company is now awaiting a separate foreign exchange quota from SAFE, up to a possible $200m.
Anthony Michael, head of Asia Pacific fixed income at Aberdeen said: “China has seen substantial growth in its onshore government and corporate bond markets in recent years, growth we expect will continue for some time to come.
“Overall we expect the development of China’s financial markets to provide many opportunities to diversify our investment strategies across the region for many years to come. Not just to be long the Chinese currency, but also to achieve diversified credit and interest rate strategies for our clients as well.”
©2010 funds europe