Published by Fund Selector Asia – 23rd Aug 2018
QDII funds, which mainland firms use to invest domestic capital outside of China, have had strong net outflows during the year.
The qualified domestic institutional investor (QDII) scheme enables domestic fund managers to invest onshore capital outside of China.
Chinese regulators revived the QDII programme in April after a three-year halt to quota issuance. However, money has continued to flow out of QDII funds.
The funds saw net outflows of RMB 14.9bn ($2.17bn) year-to-date, with redemptions across almost all Morningstar’s QDII categories, according to data from the fund research firm.
The only QDII categories that had net inflows this year are Greater China allocation and US equities, according to Morningstar data.
The QDII programme, which is the oldest channel for Chinese to invest offshore, has not done well since it first launched in 2007, Stewart Aldcroft, Asia-Pacific senior adviser for markets and securities services at Citibank, said previously.
Firms launched the first QDII products in 2007, just before the global markets collapsed in 2008, he said. “Retail investors who took advantage of that got heavily burdened.”
Similarly, Hong Kong-domiciled funds offered on the mainland through the Hong Kong-China mutual recognition of funds (MRF) scheme, which mostly invest in markets outside of China, have continued to have outflows during the year.
Hong Kong interest
The Greater China region, particularly Hong Kong, has become a favoured investment destination for Chinese investors who seek equities. Funds that invest in Hong Kong through the Stock Connect schemes saw net inflows during the year, according to Morningstar data.
Funds under the Shanghai-Hong Kong-Shenzhen Allocation and Shanghai-Hong Kong-Shenzhen equity categories were among the top funds in terms of year-to-date inflows.
Allocation and bond funds saw the biggest outflows during the same period.
