Allianz unit launches renminbi deposit fund

Allianz Global Investors is looking to roll out a new renminbi currency fund in at least eight European countries, hoping to benefit from what its managers dub the “internationalisation of China’s capital markets”.

The planned launch comes after Beijing broke the fixed exchange rate to the US dollar it had enforced for two years, in June 2010.

Wealth managers paint a bright future, with one caveat, for emerging Asia currencies in general and the yuan in particular.

Barclays Wealth noted this week EM currencies had been under “intense pressure” in recent weeks after being caught up in the global sell-off of risk assets.

But Kevin Gardiner, Barclays Wealth’s head of global investment strategy, said in a research note he expected Beijing to continue allowing its tender to appreciate versus the US dollar. He said, though, as forward rates have already priced in some such appreciation, Barclays Wealth preferred to express this via a basket of other Asian currencies.

“Although risks remain over the short-term, we remain constructive on the long-term prospects of these currencies due to their supportive fundamentals.”

AGI’s renminbi product, which will sit within a Luxembourg Sicav structure, will have registration applications filed in France, Austria, Switzerland, Italy, Sweden and Finland, as well as the UK.

A spokesman for the German manager said the Allianz RCM Renminbi Currency fund already had written approval from regulators in Luxembourg.

The Ucits IV-compliant product will invest in a “diversified portfolio of high quality renminbi deposits” to give investors “lower risk exposure to the internationalisation of China’s capital markets”, according to the group.

Helen Lam, fund manager (pictured), said: “The anticipated renminbi appreciation is 4% to 7% per annum, which makes it an alternative, uncorrelated, investment opportunity. In spite of recent market volatility the renminbi has appreciated at a faster pace since August, which indicates that the Chinese authorities are committed to taking steps to improve the currency’s convertibility with the ultimate goal of internationalising it.”

Lam said factors driving the appreciation of China’s tender included Beijing having over $3trn of foreign exchange reserves – “a significant accumulation which will provide a level of defense against regional and global market crashes” – as well as trade surpluses with major trading partners, and Beijing being able to shift growth focus from exporting low cost manufacturing goods, to domestic consumption and investment.

Lam said Chinese inflation would likely calm to between 5% and 6% over the medium term.

She added: “”The renminbi is not a freely tradable currency, but the Chinese authorities are slowly changing this. They want the appreciation of the renminbi against other currencies to be controlled. The Allianz RCM Renminbi Currency fund seeks to benefit from this appreciation. Offshore renminbi deposits offer a good level of liquidity, and the fund will look to capitalise on this.”

Nick Smith, a managing director of Allianz Global Investors Europe said the fund came after the Allianz RCM Renminbi Fixed Income fund, which launched with €450m.

The group has since capped this fund to new investors, to preserve fund liquidity, and Smith said he expected high demand for the latest fund, as well.

 

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