Renta4 goes with Citi for E2C services on China A-shares investments

Citi has been appointed by Renta4, a publicly-listed Spanish bank specialised in wealth management, brokerage services and corporate advisory, to provide execution to custody (E2C) services for transactions in China A-Shares through the Shanghai-Hong Kong Stock Connect.

Through this deal, Renta4 will become the first Spanish financial institution to directly access the China A-Share market. Citi will facilitate the trades by providing an integrated pre- and post-trade solution including execution, settlement and custody services.

The opening of the Chinese capital markets provides a wealth of investment opportunities to the company's clients and tapping this significant market was a logical step in Renta4's growth strategy, said Juan Luis López, chief executive officer at Renta4.

Stock Connect "revolutionises access" to the market by proposing a much simpler option than previous access routes, however the scheme still presents some challenges, which Citi has seamlessly helped us navigate, said López. "The philosophy at Renta4 as an investment services specialist bank is to offer investors access to a wide range of investment products and respond to demand from our clients and their investment needs in terms of products, asset classes and markets," he said. "The idea to provide access to the China market through the Shanghai-Hong Kong Stock Connect makes part of our strategy to provide a comprehensive investment range to our clients."

Renta4 offer futures, commodities, warrants (leveraged/short), and other derivative instruments, but the firm treats structured products differently as they "embed risks that need to be understood by investors" and require "suitability checks".

"Renta4 doesn't sell or issue structured products, but we do advise our clients on particular structures if they have an interest," said López. "If our clients demand access to the China A-shares market via structured products, we would look into it and see what the possibilities are to meet that demand."

Citi will provide its comprehensive brokerage platform and the market capabilities of its on-the-ground custody network in more than 60 countries to deliver an integrated solution that provides Renta4 with a delivery versus payment (DVP) settlement which minimises counterparty risk and the need for pre-delivery of shares.

Launched in November 2014, Stock Connect has significantly facilitated access for international investors into the world's second largest economy in terms of GDP by allowing international investors with Hong Kong brokerage accounts to transact in A-shares in China. 'In just one year', the average daily trading volume of Stock Connect's Northbound Trading Link has reached US$1bn, accounting for approximately 10% of Hong Kong's daily market turnover, said Cindy Chen, Hong Kong head of securities services at Citi, in a statement. Over time, Citi expects Stock Connect to become the primary channel for global investors to access Mainland China securities as more institutions start leveraging this new channel, said Chen.

Industry Insights

Data Insights

Webinars

Special Reports

Market

Renta4 goes with Citi for E2C services on China A-shares investments