Hong Kong asset manager targets A shares

Value Partners to use RQFII yuan quota to invest in mainland market, in an attempt to use its stock-picking expertise to deliver results

PUBLISHED : Monday, 30 December, 2013, 12:55am
UPDATED : Monday, 30 December, 2013, 3:09pm

Fund manager Value Partners plans to launch a pure equity fund to invest offshore yuan in the mainland’s A-share market next quarter, as part of its response to Beijing’s efforts to globalise its currency.

The Hong Kong-based asset manager, set up by Cheah Cheng Hye, plans to use an 800 million yuan quota allocated under the RQFII (renminbi qualified foreign institutional investors) scheme to invest in the mainland stock market.

Unlike its peers, who mostly chose to launch fixed-income- or exchange-traded funds with their RQFII quotas, Value Partners believes its value-based stock picking expertise, in a market that many foreign investors find to be opaque, will deliver good results.

“The basic nature of the fund will be ‘benchmark agnostic’ and will rather include active stock picking and bottom-up research,” Timothy Tse, chief executive, said.

“Many investors may have a neutral view on the China economy, but the asset pool available in Europe and the United States is so large that they only need to allocate a small amount of money to RQFII funds and there will be huge demand,” Tse said.

Apart from the new fund, the Hong Kong-based manager is planning a number of other initiatives to capitalise on the rising opportunities of a more open mainland Chinese financial market.

For example, it plans to add yuan shares to some of its products, so that investors can buy fund products with yuan, and it is also paying close attention to the development of the QDLP (qualified domestic limited partner) scheme in the Shanghai free-trade zone, which allows foreign hedge fund managers to sell their fund products directly to domestic investors on the mainland.

In September, six global hedge funds, including the world’s biggest managers like Oaktree Capital, were granted US$50 million quotas under the programme.

“The regulator would want the initial launch of the QDLP scheme to be very successful,” Tse said. “For this they do not need a big size. They just need to make sure it is accepted by people in China.”

Tse believed that after its launch was successfully managed, the regulator would want to expand the scheme to include more players.

At the end of June, assets under Value Partners’ management were worth US$8.6 billion compared with US$9.3 billion in May and US$8.5 billion at the end of last year. Its first-half performance was hurt by widened losses in fair-value of investments, with net income down 96 per cent to HK$3.3 million.

Value Partner shares on Friday jumped 35 HK cents, or 6.36 per cent, to HK$5.85, its highest in 28 months.