China's State Administration of Foreign Exchange (Safe) has awarded another qualified foreign institutional investor (QFII) quota, for $200 million, to Manulife Asset Management (Hong Kong).
MFC Global Investment Management (MFC GIM), part of Manulife Asset Management (Hong Kong), intends to fill the quota by launching two QFII funds -- a $140 million China A-share fund and a $60 million renminbi bond fund. The funds will be available to institutional investors globally.
MFC GIM has been pre-marketing the two funds since April across Asia and beyond, taking in Australia, Hong Kong, Korea and Singapore as well as Europe and North America. The funds are attracting significant interest from firms ranging from Canadian pension funds to Swiss private banks, says Avere Hill, Hong Kong-based head of institutional sales and marketing for Asia at MFC GIM.
The plan is to IPO the funds on about August 9, subject to regulatory approval, and have the whole quota filled by the end of August, Hill tells AsianInvestor.
Domiciled in the Caymans and managed in Hong Kong, the funds can use Chinese stock-index futures and options, he adds, and they plan to do so where appropriate.
Meanwhile, MFC GIM is talking to certain clients -- including some of the larger global pension plans -- with a view to sub-advising them on their own QFII allocations.
The fund launches continue the firm's expansion in the region. In March, Manulife acquired a 49% stake in Beijing-based joint-venture asset-management firm Manulife Teda and in early June was granted a $500 million qualified domestic institutional investor (QDII) quota to the JV.
The China A-share fund will invest in stocks listed in China's A-share equity markets on the Shanghai and Shenzhen exchanges. It will be managed by MFC GIM's Greater China equities team of Matthew Lee and Terrace Chum in Hong Kong and will be sub-advised by Manulife Teda in Beijing.
Matthew Lee, head of Greater China equities at MFC GIM, says: "The A-share market offers a wider spectrum of investment choices, as many Chinese companies prefer to raise capital on this market than on overseas markets; abundant liquidity and high daily trading volumes; and important diversification opportunities thanks to a lower correlation with foreign equity markets."
Meanwhile, the RMB bond fund will tap into China's bond market, the largest in Asia after Japan, and will be managed by Ronald Chan and Paula Chan of MFC GIM's Hong Kong-based fixed-income team.
"China benefits from robust fundamentals, strong FX reserve levels and a healthy position in both fiscal and current accounts," says Ronald Chan, assistant vice-president of fixed income at MFC Global GIM.
"As China's domestic consumption continues to increase, the country will continue its infrastructure improvements," he adds. "We expect much of the financing for this to come from local Chinese bonds, which will help sustain the long-term growth of the country's bond market."
MFC GIM and Manulife Teda collectively manage over $5 billion in China as at March 31.