Invesco Great Wall readies Shenzhen Connect fund

The joint-venture asset manager is preparing a mutual fund designed for trading on the upcoming Shenzhen-Hong Kong Stock Connect, despite market fears over delays to the scheme's launch.
Invesco Great Wall readies Shenzhen Connect fund

Joint venture asset manager Invesco Great Wall has started preparations for a mutual fund investing via Shenzhen Connect, despite reports that the cross-border scheme has been delayed.

The new mutual fund is expected to focus on investing in Hong Kong equities, and the JV has been in talks with its distribution and banking partners.

However, as to when they believe the trading link will launch, the firm’s management is tight-lipped.

Shenzhen-based Invesco Great Wall Fund Management, a joint venture between Invesco and Great Wall Securities, said it would submit an application for a Shenzhen-Hong Kong Stock Connect equity mutual fund when the scheme launched.

Richard Chow, the firm’s deputy chief executive and head of investment, declined to comment on when he thought Shenzhen Connect would be launched. However, he said he believed both mainland Chinese and Hong Kong regulators would choose an appropriate launch time in line with market conditions.

“The [Shenzhen Connect] programme will launch for certain,” Chow said.

This week AsianInvestor reported growing concerns that Shenzhen Connect and other cross-border schemes were facing delays due to regulators' limited resources being focused elsewhere. After a turbulent summer of A-share swings, the concern is that authorities are putting all their energies into stabilising mainland Chinese stock markets.

Market participants expect small and medium-sized companies on the Shenzhen Stock Exchange to be a key niche under the trading link. In addition, Chow said he expected Hong Kong-listed SMEs to be included in the upcoming programme, in contrast to the focus on blue-chip stocks on the existing Shanghai-Hong Kong Stock Connect.

Chow said the firm’s preparations were not merely over product design, but it also has to build its research team’s capabilities, particularly in Shenzhen and Hong Kong stocks. Meanwhile, the firm has started discussions with its sales channels and custodian bank.

The upcoming fund is in line with what Chow sees as increasing demand for overseas equities and fixed income products from China’s retail investors, amid lower expectations of renminbi appreciation against the dollar.

Invesco Great Wall was the first Chinese fund company to launch a Stock Connect mutual fund in April, after the China Securities Regulatory Commission (CSRC) gave mainland mutual funds permission to buy Hong Kong-listed shares.

The firm’s first Stock Connect fund successfully raised a total of Rmb11 billion ($1.7 billion) between March 26 and April 13. It was structured with the flexibility to include Shenzhen Connect once the link goes live.

The firm had been discussing product ideas with the CSRC since July 2014 and submitted details for the first fund's registration in September last year, two months before the cross-border trading link went live.

At the end of June this year, Invesco Great Wall was managing Rmb71.9 billion in mutual fund assets, and a total of Rmb84.2 billion, including its segregated accounts business and subsidiaries, according to the Asset Management Association of China (Amac).

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