Axioma tie-up taps Chinese growth potential

Axioma, a provider of risk management tools, has teamed up with indices provider China Securities Index (CSI) to launch specialised financial instruments, as China signals a greater willingness to open its markets to the rest of the world.

Axioma, a provider of risk management tools, has teamed up with indices provider China Securities Index (CSI) to launch specialised financial instruments, as China signals a greater willingness to open its markets to the rest of the world.

The new optimised factor indices will be based on the CSI 300 index and will consist of a basket of securities chosen from the underlying index and constructed with Axioma’s optimisation technology. The indices will be distributed by CSI.

Olivier d’Assier, Asia Pacific managing director of Axioma, told theTRADEnews.com the thirst for instruments such as indices and exchange-traded funds (ETFs) would continue to boom as mainland Chinese authorities relax investment rules.

“ETFs are the most efficient way for foreign investors to get exposure to China’s domestic market since they cannot visit individual companies. Right now the only way to hedge against sector bias in current ETFs is with a total return swap from a broker, which is inefficient. The time has come to launch ETFs with opposing exposures for market participants to accurately hedge,” he said.

Rules governing investment inflows into China from foreign asset managers and those that guide Chinese asset managers’ investments outside of mainland China are changing as authorities cautiously open the door to foreign institutional investors, while domestic counterparts have increased freedom to invest abroad.

Last year, the qualified foreign institutional investor (QFII) quota reached US$80 billion, as the Chinese currency version, the renminbi QFII, or RQFII, formed in December 2011 to give Chinese firms with renminbi reserves based outside of China for tax reasons a way to gain exposure to Chinese assets from outside the country continued to grow.

“China will continue liberalising their markets but their policy towards opening up to the rest of the world is purposefully slow. This must be viewed in the context of the need to have a free-floating, exchangeable renminbi, which will happen in time. Once China opens up fully, they can’t go back,” said d’Assier, who has worked with the Chinese funds industry since 2001.

Recent comments from the regulatory body in charge of the investment regimes, the China Securities Regulatory Commission, have indicated these quotas may be increased by a factor of ten.

Meanwhile, for Chinese investors seeking to invest in foreign markets, the qualified domestic institutional investor (QDII) continued to grow, awarding 107 firms just over US$85 billion in quotas to invest in foreign markets in 2012.

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