The newly launched wholesale income fund allows investors to ride the recovery in China by investing in its burgeoning bond market that has grown steadily in size.
Affin Hwang Asset Management (Affin Hwang AM) has announced the launch of the Affin Hwang Renminbi (RMB) Bond Fund, a wholesale income fund that provides access to opportunities in China’s fixed income market, including government and corporate bonds.
To achieve its investment objective, the fund will invest a minimum of 70% of the fund’s net asset value (NAV) in bonds and a maximum of 30% of the fund’s NAV into money market instruments and deposits.
“Against a low interest rate environment, China’s bond market provide investors a highly attractive level of yield as well as potential upside price appreciation due to its strong fundamentals,” said Chan Ai Mei, chief marketing and distribution officer of Affin Hwang AM.
She added that the size of China’s domestic bond market has grown steadily in size to become the second largest in the world, making it too large for investors to ignore anymore as part of a global portfolio.
“Ongoing liberalisation measures such as the Bond Connect and China Interbank Bond Market (CIBM Direct) has contributed to a deep bond market with a breadth of issuances spanning different sectors, sizes and credit ratings. Its inclusion into global indices also increases foreign investments into China’s onshore bonds and will lead to more inflows,” added Chan.
On the outlook for China bonds, Esther Teo, senior director of Fixed Income, Affin Hwang AM said, “First-in-first-out to emerge from the pandemic, China is seen leading the recovery globally and is staging the strongest growth post-COVID-19 amidst an accelerated restart. China reported a 2.3% GDP growth rate in 2020 and was the only major economy to avoid contraction due to COVID-19 shocks. The country’s strong outperformance backed by a stable currency will underpin demand for renminbi denominated bonds.”
“As an asset class, China bonds exhibit a low correlation compared to other fixed income markets which makes it ideal as an option for diversification. Structurally, China’s gradual shift towards becoming more domestic focused and consumer driven provides a positive backdrop for more sustainable and quality growth,” Teo added.
Through a robust credit selection process that incorporates fundamentals, valuation and technical analysis, the fund will seek to generate positive yield by investing in high quality issuers including government bonds, central government backed and state-owned enterprises (SOEs) such as policy banks as well as high quality corporate issues.
The base currency of the fund is in RMB, but it will be offered in both RMB and MYR. The minimum investment amount is $5,000 in either currency, and the fund is suitable for sophisticated Investors who seek regular income distribution, have a medium to long-term investment horizon and have a low to medium risk tolerance.
Investors are advised to read and understand the contents of the Fund’s Product Highlights Sheet and Information Memorandum dated May 25, 2021 before investing.