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China’s Yinhua Fund Management joins MRF scheme

Yinhua Fund Management, an independent mainland asset manager set up in Hong Kong, received approval from Hong Kong’s Securities and Futures Commission to sell a fixed income product in the SAR through the Mutual Recognition of Funds (MRF) scheme, according to the SFC.

The fund, the Yinhua Credit Theme Jijihong Bond Fund, was approved by the regulator last week.

The strategy is to invest in bonds and convertible bonds issued onshore in China by the government, financial institutions and corporations, according to Wang Yong, a responsible officer at Yinhua International Capital Management, which is the Hong Kong-registered entity of the Chinese firm.

Wang said that the firm decided to join the MRF scheme because, based on talks with institutional investors, there is demand for Chinese fixed income products in Hong Kong. “We believe there are good opportunities in the onshore fixed income market,” he said.

Investors in Hong Kong have shown interest in the Chinese onshore fixed income market. For example, the Bond Connect proramme, which allows purchases of onshore bonds in Hong Kong, saw an initial trading volume of RMB 7bn when it launched earlier this month, Nathan Chow, an economist at DBS, said in a report published last week.

Several companies have benefited from the Bond Connect programme. According to the report, the RMB 16bn bond issue by Agricultural Development Bank of China was ten times oversubscribed. In additition, China Development Bank sold half of its RMB 20bn issue to foreign investors.

“Higher yields are a clear lure for foreign investors in spite of rising bond yields in some developed markets,” Chow said in the report. Ten-year Chinese government bond yields stood at 3.57%, compared to UK Gilts’ 1.89% and US Treasuries’ 2.34%. In the corporate space, five-year notes in China pay around 5% versus Asian AAA-rated dollar bonds’ 3%.

Fund managers such as Angus Hui, Schroders’ Asian fixed income fund manager, and Bryan Collins, Fidelity International’s fixed income portfolio manager, said previously that Chinese onshore bonds present buying opportunities.

More MRF launches

Yinhua’s bond fund was first launched in 2013 and is managed by Zou Weina, who joined the firm in October 2012, according to the firm’s website.

As of the end of June, the fund had assets of around RMB 498m ($73.77m), according to Wang. 

Yinhua International, which is not owned by a Chinese bank and is not a joint venture, first received licences in Hong Kong in 2014. The firm has licences to carry out activities on asset management (Type 9), dealing in securities (Type 1) and advising on securities (Type 4), according to SFC records. As a responsible officer, Wang has a Type 1 licence, which he obtained last month.

Wang added that the firm plans to submit applications to sell more funds under the MRF scheme.

The Beijing-based firm, which also has an office in Shenzhen, is the 16th largest fund management firm in China as of the end of 2016, managing around RMB 152bn in assets, according to data from Cerulli Associates.

So far, only two China-domiciled funds have been approved to be for sale under the scheme this year. The first one was E Fund Management’s Stable Return Bond Fund, which received approval in March but is still not available for sale to investors, SFC records show.

This brings a total of 50 China-domiciled funds that the SFC approved for sale in Hong Kong since the MRF scheme was launched in 2015. However, only two dozen funds have been made available for sale to investors.

Northbound sales (Hong Kong-domiciled funds available for sale in the mainland) have been stronger than southbound sales, as reported. Since January 2016, total net sales for the five northbound funds was $1.4bn as of the end of June, compared to the net sales of southbound funds of $25.3m.

Part of the Mark Allen Group.