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Christine Chan

HONG Kong-registered Brilliance Group Holdings Co is arranging a China fund worth US$150 million (about $1.15 billion) for listing on the territory stock exchange.

  Group chairman Yang Rong said yesterday Brilliance would be the investment manager for the open-ended fund, which was expected to have a yield of at least 15 per cent.

  He said majority shareholdings in the fund would go to a US investment bank and a Hong Kong investment bank respectively, with Brilliance Group taking a minority stake.

  ''The fund will mainly invest in mainland industrial companies, which will eventually be arranged to list overseas,'' said Mr Yang.

  He would not reveal the names of the investment banks involved, saying details had to be finalised.

  Mr Yang is one of the leaders in the New York listing of Brilliance China Automotive Holdings (NY Brilliance), the first mainland firm to be quoted in a foreign exchange.

  Hong Kong Brilliance Group has been studying a secondary listing in Hong Kong for NY Brilliance, but Mr Yang said the chances were slim.

  ''I have talked with the Hong Kong listing chief Herbert Hui Ho-ming over retaining our voting rights for our stake in NY Brilliance if it is given a secondary listing status in Hong Kong,'' he said, adding that it seems impossible.

  At present, Chinese Financial Education Development Foundation (CFEDF), whose major sponsor is Hong Kong Brilliance Group, has a 55 per cent stake in NY Brilliance.

  Mr Yang also is CFEDF executive director and vice chairman.

   Shenyang minibus-maker Jinbei has a 15 per cent shareholding in NY Brilliance, which in turn generates most of its income from Jinbei.

   Mr Yang said Hong Kong Brilliance had in its investment portfolio five companies that could meet requirements for listing in Hong Kong and abroad.

  The enterprises - ranging from petrochemical to machinery, food and beverage and non-ferrous metal businesses - each had total assets of more than 300 million yuan, Mr Yang said.

  ''We have opted for buying listed shells for the enterprises, and are hoping to list them by this year,'' he said.

  Hong Kong Brilliance had signed two letters of intent during The Conference on International Co-operations of Chinese Medium and Large Enterprises, being held in Shenzhen.

  The first deal would carry a total investment of US$30 million, and the second investment of $40 million.

   Hong Kong Brilliance has a 50 per cent stake in both enterprises.

  Meanwhile, Hong Kong Brilliance has been appointed the investment manager of one-third of the total asset value of a New York-listed fund.

   Mr Yang said about $100 million would be invested in China.

  The Brilliance fund, at $150 million, is probably the biggest mainland-backed fund of its kind.

  In June, a consortium led by China Merchant Holdings announced plans for a $100 million China fund. The others involved in this fund are the Bank of China, Credit Suisse and Yamaichi Securities.

  In the same month, Tien Lee's China Aeronautical Technology Fund - aimed at raising $110 million - was unveiled.

  These two funds broke new ground in having active Chinese participation. Previously, only the Hongkong-based Bank of China had a China fund, while the remainder were set up by foreign companies.

  Hong Kong saw an explosion of China-fund issues last year, turning it into the centre for China fund management although a large number of the funds are listed in London and New York.

   In all, there are 37 such funds which have raised about $1.82 billion in initial offerings.

  In Hong Kong, the number of listed funds is small. Among those listed are Standard Chartered's China Assets and Morgan Grenfell's The China Fund.

  Most China funds are relatively small and closed-ended, suggesting that fund managers tend to target their funds at long-term investors who do not bail out at the hint of trouble on the mainland.

      Indeed, the generally lacklustre performance of Chinese funds so far this year suggest that investors must take a long-term view on investments.

  Because of a shortage in investment vehicles, these funds tend to keep a sizeable amount in cash and in Hong Kong stocks with a strong China exposure.

  These stocks could be either Hong Kong companies with a sizeable presence in China or counters controlled by mainland companies.



Brilliance plans $1.1b China fund