Korea Development Bank first to invest in Chinese stocks and bonds with RMB

Korea’s number one state owned bank, Korea Development Bank (KDB) made some history as announced first by the Korea Times. The bank became the first Korean lender qualified to raise yuan offshore to invest in onshore capital markets in China, the policy bank said Sunday.

KDB per the Korea Times says it wants to invest in equities and bonds listed on Shanghai and Shenzhen Exchanges with the 1 billion RMB quota given by the Chinese government.

Back in July of 2014, Korea and China made their plans official to establish direct trading between the won and the yuan, which eliminated the need to exchange either currency into U.S. dollars. Back then, it was estimated Korea’s Renminbi Qualified Foreign Institutional Investor (RFQII) investment ceiling would be 80 billion yuan in total.

KDB gained a Renminbi Qualified Foreign Institutional Investor (RQFII) status in June 2015 from the Chinese financial regulator with a 1 billion yuan allotment.

“KDB is starting RQFII investments to increase the financial cooperation between Korea and China,” said an official of the bank. “With the investments, we aim to cope with the expansion of Chinese capital markets.”

The announcement has come one month after China launched a direct market exchanging Korean won and yuan in Shanghai. In Seoul, the market trading the two currencies was set up in December 2014, following a bilateral agreement in July 2014.

Once licensed as RQFII, foreign investors are permitted to buy renminbi-denominated “A shares” in China’s mainland Shanghai and Shenzen stock exchanges.

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