After receiving approval from the Commission de Surveillance du Sector Financier (CSSF), the fund house said its East Capital (Lux) – China Fund can invest up to 100% in A-shares through the Stock Connect.
The East Capital (Lux) – Emerging Asia Fund can now invest up to 30% of its portfolio through the programme.
Since 2013, East Capital has invested $100m in the A-shares market using its QFII license.
“We believe this market is fascinating for several reasons. There is a wide range of interesting and often privately held and entrepreneur-driven companies in sectors such as healthcare, consumer goods, services and specific industries that are listed on the A-shares market,” said Karine Hirn, partner and co-founder of the firm.
By comparison, “the Chinese companies listed in Hong Kong, so-called H shares, are more often larger companies, state-owned enterprises and banks”.
“Our investment team spends a lot of time visiting companies on the ground to identify good investments, and monitor holdings. This hands-on approach is key to minimising the risks on this market that are still very high, notably in terms of quality of issuers and transparency,” she added.
A-shares are expected to be included into global benchmarks, which would have a major impact in terms of flows, the firm said.
“In terms of valuations, and despite the strong rally at the end of 2014, the market still trades at P/E of 14x, which is 20% below its 10-year historical average.”