Latest bond fund confirms trend for razor-thin yields on yuan debt

Ping An of China Asset Management (Hong Kong) will launch a yuan bond fund today targeting retail customers in Hong Kong.

The company, a subsidiary of Ping An Insurance (Group), the mainland's second-largest life insurer, said the yuan fund would be open-ended and would have an expected average yield of 1.5 to 2 per cent.

The fund, named Ping An of China SIF-Bond Fund, would not invest directly in the mainland but focus on yuan-denominated debt instruments, deposits and other instruments such as convertible bonds and commercial paper issued or distributed outside the mainland.

It joins a growing list of bond funds in Hong Kong that were launched on the back of 2010 liberalisations that allowed offshore firm to borrow in yuan.

The fund charges a 1 per cent yearly management fee and a subscription fee of up to 5 per cent. The minimum subscription amount is 10,000 yuan (HK$11,900). Dividends will be distributed twice a year.

Benjamin Rudd, executive director and head of overseas investment of Ping An of China Asset Management, said the company is launching the yuan bond fund now because there is growing availability of bonds for investment.

But Castor Pang Wai-sun, head of research at Cinda International, said Hong Kong's secondary market for yuan bonds is in its infancy, and the returns that Ping An offered would be too low to attract retail investors.