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Chinese asset managers put $300m into A-share market

E Fund, Harvest and Value Partners are among the firms buying their own funds amid A-shares volatility.

Twenty-six asset managers have spent around RMB 2.05bn ($292.8m) buying their own funds, according to a statement from Asset Management Association of China (Amac).

Tianjin-headquartered Tianhong Asset Management is the biggest contributor with RMB 501m, the statement noted. About half owned by Ant Financial, Tianhong AM is the manager of one of the largest money market funds in the world, Yuebao.

Most of the firms in the list are domestic. However, the fund houses with Hong Kong offices include E Fund Management which spent RMB 300m and Harvest Fund Management, which contributed RMB 50m.

Moreover, even though Value Partners does not appear on Amac’s list, the Hong Kong and China subsidiaries have recently invested no less than HK$100m of their house capital into the group’s underlying funds, in particular the Greater China equities and China-focused equities portfolios, according to a spokeswoman for the firm.

FSA contacted China Asset Management which is not on the Amac list. A spokesman said that the firm’s policy prohibits them from buying their own products.

FSA also contacted E Fund Management for more details but the firm declined to comment while Harvest Fund Management, Tianhong AM and Amac were unable to reply in time for publication.

The internal buying comes against the backdrop of China’s onshore markets plung on Monday, the opening day after the extended Chinese New Year holidays as authorities moved to contain the spread of the coronavirus.

The Shanghai Securities Composite Index dropped 8.73% while the Shenzhen Securities Component Index plunged 9.13%, but markets seem to be on the rebound.

Firms declined to comment on why they are investing in their own products, but it could be that they see A-share volatility as a buying opportunity, as suggested in some press releases.

Rachel Wang, Morningstar director of manager research in China, believes that the buying is a demonstration of Chinese fund manager confidence in the market despite the short-term volatility. “This also sends a positive message to the investors that the fund houses are all in this together,” she told FSA.

However, another possibility is that the buying is to comply with government instructions to contribute to market stabilisation.

A-share opportunity

“While SARS dented global markets in early 2003, investor sentiment recovered upon control of the outbreak. The MSCI China and Hang Seng Index rose 93% and nearly 50% respectively from the lows in April 2003 after tumbling around 15% from the start of 2003,” according to a statement from Value Partners.

“Based on the experience with SARS, the equity markets will likely recover after the number of confirmed cases fall from peak levels,” the statement noted.

E Fund Management said in a statement that “at present, the market mechanism for A-shares is improving and the valuation is at a low level. The medium- long term still has relatively high investment value. The short-term adjustments caused by the impact of virus have instead brought good investment opportunities in the medium and long term”.

Last Saturday, China’s financial authorities jointly announced a series of measures aiming to boost market liquidity. On Monday, PBOC announced that it would inject RMB 1.2trn ($171.4bn) into the market.

The global spread virus has 24,324 confirmed cases in mainland China to date and 490 people have died, according to the latest report from China’s National Health Commission.

In Hong Kong, there are 18 confirmed cases including one dead, Macau has ten and Taiwan has 11, the report added.

Part of the Bonhill Group.