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Affin Hwang launches UBS fund in Malaysia

Greater China funds had the second highest net inflows in Malaysia, according to Morningstar data.
Bin Shi, UBS Asset Management

Kuala Lumpur-based Affin Hwang has launched the Affin Hwang World Series – China A Opportunity Fund to Malaysia’s qualified investors, according to a statement from the firm.

The fund is the locally-wrapped version of UBS Asset Management’s UBS (Lux) Investment Sicav – China A Opportunity Fund, which invests in China A-shares.

The Luxembourg-domiciled Sicav fund, which is available for sale in Hong Kong and Singapore to professional investors only, was launched in June last year. There is also a Cayman-domiciled version of the fund, which was incepted in 2007, according to data from FE Analytics.

This is the firm’s second product that provides investors with Chinese equity exposure. The other product, the Affin Hwang World Series – China Growth Fund, is another feeder that invests into Blackrock’s BGF China Fund, which is a Greater China product, according to FE Analytics.

“The gradual inclusion of China A-shares into the MSCI Emerging Market Index would see sizeable fund flows and draw greater global investor interest,” Chan Ai Mei, chief marketing and distribution officer at Affin Hwang AM, said in the statement.

“In the event of full inclusion, the total [weighting] of China equities could make up to 40% of the entire index weight.”

Valuations of Chinese equities have also become attractive, Bin Shi, head of China equities at UBS Asset Management, said in the statement. Both onshore and offshore China equities are priced at a 12-month forward price-to-earnings ratio of around 10x, which is 30% below the valuation for global equities.

Given the attractive valuations, Shi, who also manages the China A Opportunity Fund, said that he has been putting more cash to work compared to the first half of 2018. He and his team continue to be positive on “new economy” companies, such as those in the consumer, IT and healthcare sectors, according to the statement.

Product demand

The launch of the fund comes at a time when Malaysian investors are pouring in money into China funds, despite China being one of the worst performing equity markets in 2018.

Greater China funds became the second most popular fund category in Malaysia last year, with $1.9bn in net inflows as of the end of November, according to data from Morningstar Direct.

Other fund managers in Malaysia have seen the opportunity in offering such products. For example, TA Investment Management launched the All China Equity Fund, which is the locally-wrapped version of Investec’s All China Equity Fund.

In March, CIMB-Principal Asset Management launched the China Direct Opportunities Fund, which is the first product that has direct access to onshore China A-shares via the renminbi qualified foreign institutional investor (RQFII) channel.

CIMB-Principal saw unexpected demand for the product and had to increase its RQFII quota to RMB 1.6bn ($250m) from RMB 600m two months after its launch as the previous quota was fully utilised by the fund.

Before the Direct China Opportunities fund, the firm also launched the country’s first China-focused multi-asset fund in 2017, which is the locally-wrapped version of the Hong Kong-domiciled HSBC China Multi Asset Income Fund.

There are eight products in Malaysia that invest in Chinese equities, according to FE Analytics. They include the Am China A-shares Fund, the Manulife China Equity Fund, the Public China Access Fund and the RHB Shariah China Focused Fund.

The UBS (CAY) China A Opportunity Fund versus its benchmark index

Source: FE Analytics. Note: All fund and benchmark NAVs have been converted to US dollars

Part of the Mark Allen Group.