New Fund Allows Direct Ownership Of Chinese A Shares

by Carla Johnson, Investors Offshore.com

19 June 2006

A new fund is being launched today that will give investors in Hong Kong direct exposure to Chinese 'A-shares' for the first time.

The JF China Pioneer A-Share Fund, created by JF Asset Management, a part of JPMorgan Asset Management, can invest in A shares via JF’s own US$150 million quota as a qualified foreign institutional investors (QFII).

It is the first time that retail investors have been given the opportunity to invest directly in China's A-shares other than through structured products such as participatory notes or equity-linked notes.

The fund may also invest in other securities, such as H shares, B shares, China-oriented listed companies or cash, although at least 70% of the fund must be invested in A-shares, in line with investment guidelines set by China's regulators.

The fund expects to raise more than $150 million from Hong Kong clients distributed both directly and through commercial and private banks. It will have a subscription fee of 5 percent of initial investment plus a 5 percent administration charge during the first three months after the IPO, which is being held between June 19 and June 30. The annual management fee will range from 1.75 percent to 2.5 percent.

Howard Wang, head of JF Asset Management's Greater China team, was quoted by Dow Jones as stating that shares in defence and consumer related companies will form the bulk of the fund's portfolio.

"We will go and find the highest quality companies. We're not here to play heroes. We're here to try find the most sensible risk-return trade-offs," he stated.

China's stock markets have performed well this year, and have held their value despite recent volatility in global equity markets. The Shenzhen A-share index is up around 42 percent so far this year, while the Shanghai A-share index is up around 32 percent.

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