Problems for equity funds in yuan assets
Private equity funds that invested in yuan assets on the mainland might face some problems cashing in their holdings when they choose to pull out of their investments.
Domestic and foreign funds last year invested billions of yuan into private companies on the mainland. Such funds typically hold their investments until there is an initial public offering, at which point they get their money back - and they like to get it back in yuan.
But as the number of such yuan-based funds surged, exit challenges increased, experts say.
Traditional exit channels for yuan-denominated funds have been through the A-share market. But the market was volatile and weak and oversupplied by public offerings, said financial advisory firm Deloitte.
'Funds that invested yuan and want to recover yuan upon exit will find Hong Kong to be the most attractive place outside the mainland,' said Ken DeWoskin, director for Deloitte China Research & Insight Centre.
DeWoskin said 2011 would be a key year for yuan investments and the market should expect expansion.
But David Brown, greater China private equity group leader at financial advisory firm PricewaterhouseCoopers, said yuan-denominated funds would be more interested in targeting the ChiNext Stock Exchange, which was set up in 2009 on the Shenzhen Stock Exchange as a Chinese listing version of Nasdaq.
