- More than 90 per cent of fund products to be sold through the connect will have yuan share class funds
- Such funds invest in international stock and bond markets and allow investors to buy and sell their holdings in the Chinese currency
Hong Kong-based asset management companies will introduce more yuan share class funds to meet demand from mainland Chinese investors when the Wealth Management Connect scheme is launched, industry body Hong Kong Investment Funds Association (HKIFA) said on Wednesday.
Such funds invest in US and other international stock and bond markets and allow investors to buy and sell their holdings in the yuan. Fund managers use forward and other derivative products to hedge currency risks for investors. Hong Kong has allowed yuan share class funds for locally domiciled funds since 2013, and for overseas funds since 2018.
“Over 90 per cent of fund products to be sold to mainland investors through the Wealth Management Connect will have yuan share class funds. It is a natural development, as these investors would not like to face currency risks,” said Nelson Chow, the HKIFA’s chairman.
Such funds are already popular in Hong Kong, thanks to an increasing number of mainland Chinese investors putting their money into the city’s stock market. The number of yuan share class funds has risen from 191 in 2018 to 295 in June this year, and represent about 14 per cent of the total funds authorised by Hong Kong’s Securities and Futures Commission.
From left, Sally Wong, CEO, and Nelson Chow, chairman, both of the HKIFA, and Arnold Chow, deputy general manager for personal digital banking products at Bank of China (Hong Kong)
Most mainland Chinese investors will want to invest in funds and other investment products in the yuan, Chow said. He added that BOCHK will work with its parent, Bank of China, and use their more than 1,100 branches in the Greater Bay Area to sell such products through the Wealth Management Connect.
The development of such funds points to the increasing importance of the yuan as a currency used for investments, even though it is not yet fully convertible. Hong Kong, which has the largest pool of offshore yuan deposits at more than 820 billion yuan (US$126.85 billion) as of the end of June, is going to play a bigger role in the international satiation of the yuan after the Wealth Management Connect is launched. The demand for yuan share class funds will increase substantially after the introduction of the Wealth Management Connect, which will be a key driver boosting the city’s role as an international yuan trading center,” said HKIFA’s Chow.