4.45bln Yuan ICBC Fund Targets Hong Kong

Source: The Standard

Industrial and Commercial Bank of China (1398), the mainland's largest commercial lender, has raised 4.45 billion yuan (HK$4.56 billion) for its first qualified domestic institutional investor scheme product that targets overseas equities and related assets.

ICBC's open-ended fund will invest half its assets in mainland-related stocks in Hong Kong and the other half in high- yield bonds and money-market products across Asia to hedge against yuan appreciation.

The Beijing-based bank completed sales of the new fund in less than a month, with the 4.45 billion yuan subscribed as of Friday representing the maximum it can raise.

That makes it the largest equity fund so far for investments in overseas markets.

"It is the most popular product the bank has launched since the QDII scheme came into being," ICBC chairman Jiang Jianqing said.

The bank intends to offer another QDII fund specializing in overseas stocks soon, ICBC said Monday.

ICBC has a US$2 billion (HK$15.6 billion) QDII quota granted by the People's Bank of China.

The PBOC allowed commercial banks to invest overseas under the QDII scheme on May 14 in an attempt to channel hot money out of the overheating domestic stock market.

According to sources, the banking regulator is revising QDII terms and plans to allow banks to invest up to 70 percent of their quotas, from the 50 percent allowed at present, in equities to boost interest in such products.

Apart from occasional dips, huge A-share gains have attracted the attention of policymakers and even drew a warning from central bank governor Zhou Xiaochuan.

The CSI 300 Index has fallen 12 percent since hitting a record high on June 19, trimming its gains for this year to 84 percent.

The CSI 300 is valued at 41 times the reported earnings of its member companies, about twice as much as indexes in Japan and India, Asia's next most expensive markets.

As mainland stocks rallied, the securities regulator said on June 20 it would also allow brokerages and fund management firms to buy shares abroad, effective Thursday.

Funds must raise at least 200 million yuan to qualify for the program and they can invest in equities traded in 33 jurisdictions, including the United States, Hong Kong, Japan, Britain and Germany.

Domestic investors may buy up to US$100 billion of stocks and bonds overseas in the coming year as China removes barriers on capital, according to JPMorgan Chase.

Investors must put in at least 300,000 yuan into the fund.

JPMorgan Fleming Investment Management will help ICBC manage the portfolio.

(By Staff reporter and Bloomberg)

Editor: Ronald Li