Mirae Asset mulls yuan bond fund as investor appetite stays strong

Mirae Asset Global Investment is considering launching a renminbi bond fund, using its local expertise to tap China’s growing domestic bond market, at a time local currency debt products in emerging markets weather a storm of withdrawals from fixed income products generally.

Mirae Asset’s plans would follow similar, recently announced launches by Allianz Global Investors and DWS Investments.

Mirae Asset brings 14 years of expertise in running money in Asia ex-Japan, and eight years in China. It already runs bond funds in some other emerging markets, as well as around $5bn in Chinese securities.

It has a license for trading in A shares, and includes Chinese investments in various products including regional, country-specific and global emerging markets.

In its equities exposure it focuses mainly on large caps in excess of $500m, but Elliot Berman, Mirae Asset’s EMEA sales head (pictured), says its managers are “increasingly looking at the mid- and small-cap space, too”.

The various yuan bond fund launches planned come at a time investors are split in their views on fixed income.

Funds with connections to Europe’s periphery are typically experiencing withdrawals, while growth market products take in money.

In the week to 22 June, high yield bond funds overall registered their highest ever weekly withdrawal level, beating $2.15bn of redemptions set in May 2010.

Though EPFR added previous withdrawal spikes from this category in September and October 2008, and May and June 2010, were followed by lengthy inflow streaks.

They said of developing markets fixed income portfolios: “Investors, especially those in Europe, continue to warm to the higher yields and solid fiscal profiles offered by many sovereign issuers.”

Emerging markets bond funds posted a thirteenth consecutive week of net inflows in the week to 22 June, with about two thirds of the subscriptions going to local currency funds.

David Walker

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