BOC Hong Kong to launch mixed-asset fund amid bullish outlook on Chinese stocks and bonds

PUBLISHED : Thursday, 17 August, 2017, 6:52pm
UPDATED : Thursday, 17 August, 2017, 6:52pm

The asset management unit of Bank of China Hong Kong (BOCHK) said it will launch a China-themed mixed asset fund next week amid the bullish outlook for Chinese stocks and bonds.

The BOCHK All Weather China Income Fund will invest 70 per cent in Chinese equities listed on the mainland, Hong Kong and US markets, and 30 per cent in onshore and offshore bonds issued by Chinese companies, bank officials said on Thursday.

“We are bullish on stocks and bonds with the China concept, both onshore and offshore,” said Shen Hua, chief executive officer of BOCHK Asset Management, which has US$10 billion in assets under management.

The new fund will be the first from the bank to trade through Bond Connect, a mechanism set up in July to allow foreign investors to trade China’s interbank bond market via Hong Kong Exchanges and Clearing.

The Chinese economy is likely on an upward cycle now, with supply-side reform leading to improved Producer Price Index (PPI) and commodity prices, Shen said.

It is rare that both the Chinese equity and fixed income markets have been doing well since the beginning of this year, he added.

A simulated portfolio showed that the average fund yield was expected to be 4.2 per cent for bonds and 3.3 per cent for equities.

The portfolio invests 60 per cent of its funds in Hong Kong listed shares of mainland firms, 20 per cent in offshore US dollar bonds, and 5 per cent each in mainland Chinese A-shares, China concept stocks in the US, offshore renminbi bonds, and onshore renminbi bonds.

As the Chinese stock market has showed little correlation with the bond market since 2011, the fund’s flexible allocation between the two kinds of assets could help diversify investment risks, said Han Jian Chiu, chief investment officer of BOCHK Asset Management.

The fund will begin its initial offering on August 21 and start dealing on September 11, with three currency classes. The minimum subscription amounts are HK$10,000, US$1,000, and 10,000 yuan.