Hong Kong Investors Don't Regard RQFII Products As Personal Tools Of Choice - Survey

Tom Burroughes

14 May 2013

Renminbi-based qualified foreign institutional investor structures are not seen as the personal tools of choice for Hong Kong investors over the coming year, according to a survey by AMTD Financial Planning carried out after the RQFII regime was recently liberalised.

Some 70 per cent of respondents to the firm’s survey said they will allocate less than a fifth of their investments to RQFII products because they don’t know enough about China’s capital markets. The survey was carried out in April 2013 among a sample of 262 respondents in Hong Kong aged 18 years old or above.

The findings come after the China Securities Regulatory Commission recently announced it was removing asset allocation limits and expanding the types of RQFII holders, potentially attracting a new wave of investment to the market.

The survey also found that with the support of professional and unbiased guidance, as well as the latest A-share daily information, investors polled in Hong Kong are more eager to overweight in favour of RQFII products.

Seeking professional assistance and A-share market info for RQFII investment is important, the survey found. Some 58 per cent of respondents said they would consider increasing investments in RQFII products if they had access to the latest A-share market outlook. Furthermore, the majority of those who specified the growth in their allocation would, on average, double their investment in RQFII funds.

With the benefit of professional help on A-share portfolio management, over half (56 per cent) would be likely to overweight in RQFII products. The majority of them would increase their allocation by over ninety percent (94 per cent), from an average of 10 per cent of the own total assets to 19 per cent.

Some 84 per cent of respondents said they are concerned about both the complexity of China’s capital market and the potential impact on investment returns of political decisions and issues, leading to greater volatility. These two risk factors make investors more conservative when it comes to A-share related products, discouraging them from favouring RQFII funds in their own portfolio and picking up potential A-shares.

In Hong Kong, most investors are aware of the launch of RQFII programmes, with only 12 per cent of respondents saying they have not heard of RQFII schemes.

Survey findings revealed that investors don’t fully understand the meaning of RQFII products, with only 7 per cent accurately of them answering that they include both renminbi bond funds and physical A-share ETFs.

More than 40 per cent incorrectly deemed that A-share fund firms tap into the onshore equity market via having received an RQFII quota, when in fact they receive a QFII quota.

The survey also showed that more than 70 per cent of respondents who have invested in A-share or renminbi related products are mostly reliant on returns to select their products.

“When making sound investment decisions, investors should not heavily rely on returns of products or funds, but should also be more aware of other factors including the comparative returns, volatilities and fund expense ratios between the products,” Kenny Tang, general manager, securities business division of AMTD, said.