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Belt and Road:
Invesco launched a fixed income mutual fund on Thursday, which targets debt instruments traded in markets covered by the Belt and Road Initiative, the company said in a March 1 press release.
The fund will invest in government bonds in developing countries along the Belt and Road, government, and non-government bonds in both developed and developing countries.
However, for the sake of better liquidity, the fund will only buy bonds denominated in major currencies, which implies that the fund will focus initially on dollar bonds, before considering euro-denominated bonds at a later stage, a source at Invesco told GlobalRMB.
Ken Hu, chief investment officer for fixed income in Asia Pacific at Invesco, said the fund wants to capture the growth opportunities brought about by China’s direct investment in these countries.
“The solvency and liquidity of most of the Belt and Road countries will tend to improve, paving the way for an upgrade trend of their sovereign credit ratings,” he said in the press release. “This trend would also benefit the credit profiles of banking systems, state-owned-enterprises and private enterprises in Belt and Road countries, making their bonds more compelling.”
Hong Kong has become the preferred location of fundraising for mainland companies – a position which the city can further cement by participating in the Belt and Road Initiative, Paul Chan, Hong Kong’s financial secretary, said in his annual budget speech on February 28.
“The initiative will generate great demand for infrastructure, capital, as well as professional, legal and other high-end services over which Hong Kong has advantages,” he said. “Supporting the Belt and Road development and assisting Mainland enterprises in going global will open up new room for the development of our enterprises as well as financial and professional services.”
Quotas:
China approved $2.3bn of new QFII quotas in February, according to figures released by the State Administration of Foreign Exchange (Safe). The Monetary Authority of Macao picked up $2bn, putting the total of its quotas at $5bn, while Japan-based Asset Management One got its first batch of quotas, worth $300m. That brings the total of allocated QFII quotas to $99.2bn.
Meanwhile, UBS Global Asset Management (Hong Kong) received Rmb2bn of RMB QFII (RQFII) quotas in February, putting its RQFII quota total at Rmb3bn. That leaves the aggregate of allocated RQFII quotas standing at Rmb612.4bn ($99.7bn).
Northbound flows under the Mutual Recognition of Funds programme between Hong Kong and Mainland China slowed down in January. Overall net sales of Hong Kong funds in the mainland was Rmb12.3bn, down from Rmb12.5bn in December 2017, according to Safe’s data.
In contrast, southbound flows accelerated in the same period. Overall net sales of mainland funds in Hong Kong was Rmb398.2m, up from Rmb336.1m in the previous month.
Equities:
Acadian Asset Management has started buying A-shares, the company announced in a March 1 press release.
Asha Mehta, portfolio manager at Acadian, reckons that the Chinese stock market, which remains less sophisticated than most developed markets, will provide plenty of opportunities for investors with a quantitative investing approach.
“It is a much less efficient segment of the equity universe and thus potentially very rewarding for a disciplined and structured approach to investing,” said Mehta. “As this market expands, we believe there is a robust opportunity for alpha generation and data analysis.”
The Boston-based asset manager has Rmb1.6bn of RQFII quotas, which were allocated to the company in September 2017, according to GlobalRMB data.
Policy
Liu He, member of the politburo of the Chinese Communist Party, discussed trade relations between China and the US with Steve Mnuchin, the Treasury secretary, and Gary Cohn, director of the White House National Economic Council, on a visit to the US this week, according to media reports.
Liu, who is regarded as a confidant and top economic adviser to president Xi Jinping, also met with Jamie Dimon, CEO of JP Morgan, and David Solomon, co-chief operating officer of Goldman Sachs, on Wednesday.