East Capital receives approval to invest in Chinese A-shares
East Capital has announced that it received approval by the Commission de Surveillance du Sector Financier (CSSF) to invest in A-shares through the Hong Kong – Shanghai Stock Connect programme.
The East Capital (Lux) – China Fund can invest as much as 100% of its portfolio in A-shares through Stock Connect. The East Capital (Lux) – Emerging Asia Fund can invest up to 30% of its portfolio through the programme.
East Capital’s Asian operations are managed out of Stockholm and Hong Kong, with Karine Hirn, Partner and Co-Founder of the company leading the operations since 2010 when the firm established an office in Shanghai.
As the first Nordic asset manager to get a QFII license, East Capital has been investing more than USD 100m on the A-shares market since the end of 2013. “We believe this market is fascinating for several reasons.
“The Chinese domestic market has undergone a number of reforms, which bodes well for the future inclusion of A-shares into global benchmarks. This is expected to take place in the not too distant future, which due to the size of the market would have a major impact in terms of flows. In terms of valuations, and despite the strong rally at the end of 2014, the market still trades at P/E of 14 x, which is 20% below its 10 year historical average,” the company said.
There is a wide range of interesting and often privately held and entrepreneur-driven companies in sectors such as healthcare, consumer goods, services and specific industries that are listed on the A-shares market. The Chinese companies listed in Hong Kong, so-called H shares, are more often larger companies, state owned enterprises and banks,” said Karine Hirn, Partner and Co-Founder of East Capital.
“We have well-defined investment criteria where we primarily select companies that exhibit solid growth figures, good corporate governance standards, low leverage and high dividend yield. Our investment team spends a lot of time visiting companies on the ground to identify good investments, and monitor holdings. This hands-on approach is key to minimizing the risks on this market that are still very high, notably in terms of quality of issuers and transparency,” she added.