Baring Asset Management (Barings), the international investment firm, has today announced its plans to launch the Baring China Bond Fund, subject to regulatory approval.
The fund will be run by Sean Chang, Head of Asian Debt. Sean joined Barings in May 2012 from HSBC Global Asset Management and has over 18 years of fixed income and foreign exchange investment experience in Asian markets.
Until recently, China's financial markets have been largely closed to foreign investors, with direct access to domestic equity and bond markets limited to institutions with a Qualified Foreign Institutional Investor (QFII) quota. The recent development, over the last 18 months, of the offshore Renminbi (CNH) bond market has enabled fixed income investors to obtain direct exposure to Renminbi (RMB)-denominated debt assets and demonstrates the Chinese authorities' apparent commitment to open up China's capital markets and transform the RMB into a global currency.
This increase in issuance has been matched by a marked increase in demand as investors have sought to gain access to the expected long-term appreciation of the RMB, which up until 2007 had been more tightly controlled by the Chinese authorities. While the RMB has recently been allowed to strengthen against the US dollar, Barings' view is that the currency remains structurally undervalued with huge potential for appreciation relative to not only the US dollar, but all other major currencies.
The new Fund will aim to maximise total return, over the long-term, consisting of income, capital appreciation and currency gains, by investing in China related debt securities and RMB denominated debt securities.
Sean Chang comments: "China's offshore bond market remains in its early stages, but it is growing at a rapid pace and we believe it represents a new and exciting way for investors to participate in China's long-term economic expansion.
"In addition to providing the potential for currency appreciation over the long term, we believe that China bonds also offer attractive income-generating qualities for yield-seeking investors, particularly in the current low global yield environment."
Barings has a long history of investing in Greater China, having launched its flagship Baring Hong Kong China Fund in 1982. They were also early investors in both US Dollar and Local Currency Emerging Market Debt. As at the end of June 2012, Barings managed total assets worth $4.9bn1 in Greater China, with a further $1.5bn1 invested in specialist credit and emerging market debt.
To complement its range of emerging market fixed income products and capitalise on investment expertise in this area, Barings also recently launched the Baring Asian Debt Fund and is planning to launch the Baring Emerging Market Corporate Debt Fund, subject to regulatory approval."
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