Chinese Money Rushes Offshore Via HK Mutual Funds

Chinese investors are pouring significant funds into Hong Kong mutual fund products that invest overseas, particularly in bonds, following an expansion of the cross-border trading channel this month.

The surge in demand reflects Chinese investors' eagerness for overseas investment options amidst record-low bond yields, a struggling stock market, and a 16-month low for the yuan.

This development has opened avenues for better yields, Summer Zhen and Jiaxing Li reported for Reuters.

Several Hong Kong-registered mutual funds, approved for marketing to mainland investors, were sold out within 24 hours of opening for subscription at the beginning of the year, according to fund statements.

These funds reopened for subscription after China relaxed restrictions under the Mutual Recognition of Funds (MRF) scheme, raising the sales quota to a maximum of 80% of the funds’ total assets as of January 1, up from the previous 50% limit.

The surge in demand reflects Chinese investors' eagerness for overseas investment options amidst record-low bond yields, a struggling stock market, and a 16-month low for the yuan.

"We've seen robust demand for overseas fund allocations, given the outperformance of overseas markets in the past two years," said Niki Wu, senior research analyst at Morningstar, Shenzhen.

Bond-focused funds, especially those investing in U.S. Treasuries, were among the most popular. Notably, two JPMorgan bond funds—JPMorgan Global Bond Fund and JPMorgan Asian Total Return Bond Fund—had to suspend subscriptions from mainland investors this week after reaching their limits, Rae Wee and Samuel Shen also reported for Reuters.