New fund on LSE allows access to Chinese stock market

Invest in the top 50 companies in mainland China.

According to a release, a landmark agreement between two UK and Chinese firms means that from today, for the first time, investors will be able to invest in Chinese Stock markets in Renminbi through the London Stock Exchange (LSE).

Hong Kong-based CSOP Asset Management, a subsidiary of China Southern fund management Co Ltd, and London-based Source will launch the first Renminbi qualified foreign institutional investor (RQFII) exchange traded fund (ETF) listed London.

This fund, which will be available to retail and institutional investors across Europe, will take advantage of CSOP’s Hong Kong’s RQFII licence to allow investors to invest directly in the top 50 companies in mainland China.

The Hong Kong and UK RQFII schemes allow financial institutions to use offshore RMB to invest in the Chinese mainland securities markets (stocks, bonds (including inter-bank), and money market instruments). China’s capital controls ordinarily restrict such cross-border activity.

The launch follows the Chancellor, George Osborne and Financial Secretary to the Treasury, Sajid Javid’s visits to Hong Kong and China earlier this year to build new ties between the UK and the Chinese and Hong Kong asset management industries and build on the existing synergies:

· 62% of all RMB trading outside of China takes place in the UK.

· The UK was awarded the first RQFII quota outside of greater China. The quota is worth RMB 80 billion.

Already a world leading asset management centre, London has a lot to offer investors. But the government is determined to make sure it doesn’t stand still.

So at December’s Autumn Statement the Chancellor announced that the government will abolish stamp duty and stamp duty reserve tax on purchases of shares in exchange traded funds that are domiciled in the UK, opening the door for UK exchange traded funds to launch in London for the first time.