The asset management unit of Bank of China (Hong Kong) on Tuesday launched a bond fund for investors in Hong Kong and Macau focused on the region covered by Beijing’s “Greater Bay Area” initiative. It said it expected US$150 billion in foreign capital to flow into mainland China’s bond market over the next 18 months. “This is the first investment fund specifically focused on bonds in the Greater Bay Area, which at the moment has a higher GDP growth rate than that of the San Francisco Bay Area and the Tokyo Bay Area,” said Shen Hua, the chief executive of BOCHK Asset Management. “The fund will build on Hong Kong’s strength in the financial sector, while drawing on the developed financial networks in Shenzhen and Guangzhou, which is why we think it will do well,” he added. The company did not disclose its target fund raise, and only said the offering will be available from Tuesday until April 8, after which it will be traded as an open-ended fund. The BOCHK All Weather Greater Bay Area Strategy Fund will mainly invest in bonds issued by government bodies and companies registered and active in the Greater Bay Area, the Chinese government’s scheme to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub. BOCHK Asset Management maintained a positive outlook for the mainland China bond market, as it expects the US Federal Reserve’s decision to stop raising interest rates will increase foreign capital flow to emerging markets led by China. “We estimate US$150 billion will flow into the mainland bond market in the next 18 months,” said chief investment officer Ben Yuen. New companies in the Greater Bay Area are likely to start issuing US Dollar bonds with higher yields in the next five years, driving bond prices up as more investors buy these bonds, and bringing gains to earlier investors, Yuen added. The minimum investment amount is US$1,000, HK$10,000 or 10,000 yuan, with an average term of three years, and covers industries in the region, such as finance, technology and telecommunications. BOCHK Asset Management said it aimed to start giving out dividends three months after the sale of the fund. China approves one-stop bank account for Hong Kong residents, taking the first step to liberalise financial services on the mainland While the fund does not have a limit on the credit rating, or currency denominations of the bonds, Yuen said the company would control volatility by keeping the ratio of high-yield bonds below 50 per cent. The company has managed to capitalise on Hong Kong investors’ interest in new trends and new markets, said Stewart Aldcroft, chairman of Cititrust. “There’s no doubt the Greater Bay Area will become a very good trend. I think it is very likely that other fund managers will follow, and within a fairly short period of time one of the index companies will also create a Greater Bay Area index, and we will start to see some ETFs created against that,” Aldcroft added. “Launching it now is very topical, very early. We don’t know yet how the Greater Bay Area will fully pan out,” said Aldcroft. “Would it be a good investment? That’s the big question. I don’t think anybody will be in a position to answer for a few years,” he said.