HSBC launches MRF fund in China

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HSBC Global Asset Management has launched its first northbound fund into mainland China, but investor sentiment there is muted.

The $83.43m fund aims to build a diversified portfolio of Asia ex Japan stocks with low correlations to each other in order to reduce volatility, according to a statement from the bank. It includes investments in the defensive and cyclical sectors which, the managers believe, have demonstrated resilience during periods of volatility.

“This fund provides a differentiated investment strategy for the retail market in mainland China and helps meet Chinese investors’ increasing appetite for diversified investments,” said Pedro Bastos, CEO Hong Kong and regional head of Asia Pacific, HSBC Global Asset Management, in the statement.

Nevertheless, the latest figures from China’s northbound flows from China’s State Administration of Foreign Exchange (SAFE) suggests that their appetite is meagre or, at best, already sated.

There were net outflows of RMB113.56m ($16.75m) in December, the second consecutive month of net sales. October’s net inflow figure of RMB291.24m was an aberrant month in a full year that saw net outflows of RMB3.44bn.

HSBC Jintrust Fund Management, HSBC’s Shanghai-based partner, will act as the master agent for the fund, which will initially be sold through HSBC Bank (China), according to a  media release.

HSBC received approval from the China Securities Regulatory Commission (CSRC) last October to distribute the fund to retail investors in China at a time when China share prices were tumbling.

The MSCI China index lost 18.75% (in US dollar terms) in 2018,  but has rebounded by 11.6% this year, according to FE Analytics data.

However, Alison Brown, HSBC Global Asset Management’s head of sales, wholesale business, insisted that: “We understand that in the current market volatility investors are looking for portfolio diversification and reduced volatility while still maximising their potential investment return. That’s why it is a good timing for us to launch this fund.”

The China-Hong Kong fund passporting scheme, introduced in August 2015, allows Hong Kong-domiciled funds to be sold in China, and vice versa. HSBC Global Asset Management introduced its first MRF southbound fund the same year.


Comparative volatility and returns of HSBC Asia Pacific ex Japan Equity Volatility Fund

*Volatility %

**3-year cumulative return

*Positive weeks

*Negative weeks

HSBC Asia Pacific ex Japan Equity Volatility Focused Fund

11.62

37.46

93

63

HKM Equity – Asia Pacific ex Japan Sector

13.17

35.80

86

70

MSCI Asia ex Japan

15.15

55.18

90

66

Source: FE Analytics (in US dollars)
*13 February 2016 – 8 February 2019
**11 February 2016 – 11 February 2019

 

 

HSBC Asia Pacific ex-Japan Volatility Focused Fund vs the sector and MSCI Asia ex-Japan Index

Source: FE Analytics (Three-year cumulative return to 11 February 2019 in US dollars)

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