Haitong launches Hong Kong's first retail RMB fund

The Chinese asset manager launches a fixed-income renminbi fund that is set to be the first of many such vehicles.

With Hong Kong looking to establish itself as an offshore renminbi centre, Shanghai-based Haitong Asset Management (HK) yesterday announced the launch of the first retail RMB fund in the territory.

The Haitong Global RMB Fixed Income Fund launch -- which will formally take place on Wednesday (August 11) -- follows last month’s move to relax the rules on renminbi accounts, settlement and trading in Hong Kong and China's announcement in June that it would depeg the RMB from the dollar

Hong Kong’s Securities and Futures Commission (SFC) says it has been working closely with industry participants to enable the introduction of RMB-denominated investment products to support the initiative to develop Hong Kong into an offshore renminbi centre. The lifting of restrictions on opening RMB accounts should help boost such business.

Indeed, other asset managers – among them, Harvest, HSBC and RCM – have expressed an interest in launching RMB funds.

Haitong’s new product seeks long-term capital growth through investment in a portfolio consisting primarily of RMB-denominated fixed- or floating-rate debt instruments issued or distributed outside mainland China. These instruments may include RMB-denominated bonds issued by a variety of issuers such as government agencies, banks and corporations.

The fund may also invest in other RMB-denominated deposits issued outside mainland China, such as bank certificates of deposit and negotiated term deposits with banks, and other instruments such as convertible bonds, commercial paper and short term bills and notes, also issued outside mainland China.

The fund intends to make semi-annual dividend distributions payable in June and December in RMB, subject to the fund manager’s discretion. There is, however, no guarantee on the minimal dividend amount and number of distributions to be made. The minimum investment is Rmb10,000. BOCI-Prudential Trustee is the trustee and Bank of China (Hong Kong) the custodian.

Meanwhile, HSBC – which will be one of the distributors of the Haitong RMB fund – yesterday launched its first RMB retail certificate of deposit (RMB CD), which sold out within the first banking hour. This follows the launch of HSBC’s first tranche of RMB-denominated FX-linked deposits last month, which was also taken up within the first day.

“Investors’ interest in RMB-denominated products is mounting and so is the demand,” says Lin Yong, chief executive of Hai Tong (HK) Financial Holdings, Haitong AM’s parent company. “We will ride on this growing trend and seek to achieve investment returns through active management of the major risks associated with RMB income instruments.”

However, there are still things that need clarifying, as Cecilia Chan, HSBC’s Asia head of fixed income, points out. For instance, potential RMB bond issuers are concerned about whether they can bring the currency back to the mainland, she says.

Still, such issues are likely to be swiftly resolved, given the will to develop the RMB market.

Hong Kong has a unique role in China’s internationalisation of its currency,” says Alexa Lam, the SFC’s deputy chief executive and executive director of policy for China and investment products. “As the RMB becomes more popular and widely held outside the mainland, demand for RMB-denominated investment and financial products will grow. Hong Kong’s role is to make these products available and to manage their risks.”

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