Published On: Tue, Aug 19th, 2014

J.P. Morgan Asset Management Launches Its First Actively-managed RQFII Equity Fund

Lilian Leung, Fund Manager of JP Morgan China A-Share Opportunities Fund -

Lilian Leung, Fund Manager of JP Morgan China A-Share Opportunities Fund –

J.P. Morgan Asset Management announced on 18 August the launch of JPMorgan China A-Share Opportunities Fund, the first SFC-authorised and actively managed RQFII equity fund launched by a global asset management company. The Fund will utilise part of the investment quota from the State Administration of Foreign Exchange (SAFE) under the RQFII scheme to enable investors to have direct access to China A-share investments.

Consistent with JPMAM’s commitment to China’s growing asset management industry, this launch marks yet another “first” for Hong Kong’s fund industry. JPMAM was also the first global asset management company to launch an SFC-authorised fund in Hong Kong which invests directly in China A-shares via the Qualified Foreign Institutional Investor (QFII) investment scheme back in 2006. That fund – the JPMorgan China Pioneer A-Share Fund – is now the largest retail QFII fund in Hong Kong.

The new Fund aims to be fully invested in A-shares, enabling investors to capture the investment potential of China domestic equity market. Unlike other RQFII funds that tend to invest in fixed income or are passively managed, the new Fund will be actively managed and offer investors access to a wide range of sectors in the equity space. The manager of the Fund has the flexibility to allocate at least 70% or more of the portfolio to China A-Shares and up to 10% to PRC-issued equity funds (including ETFs) investing in A-Shares. In addition, up to 15% of the portfolio can be invested in B-Shares and up to 30% in Chinese stocks listed in Hong Kong and the US and non-PRC-issued equity funds (including ETFs).

Ancus Mak, Vice President, Retail Distribution at JPMAM, said, “With our unparalleled commitment to investing in the China A-share market, we are pleased to introduce the SFC-authorised and actively managed RQFII China A-share equity fund to investors, which is the first of its kind launched by a global asset management company since the RQFII quota was granted. Our Fund aims to capitalise via
extensive exposure to A-shares across sectors and to achieve long-term capital appreciation by participating in China’s New Economy. In addition, this RMB-denominated fund is suitable for investors who hold RMB and wish to participate in the longer-term globalisation of the currency.”

Lilian Leung, Fund Manager of JPMorgan China A-Share Opportunities Fund, said, “We believe that further liberalization of China’s A-share market will gradually change the investor profile. At the moment, retail investors in that market account for as much as 80% of market turnover and they tend to focus more on small-to-mid cap stocks. Therefore, some good quality big cap names might be undervalued and greater participation from foreign and institutional investors, who might focus more on a longer term investment horizons, could support a potential re-rating of the market.”

“At present, inflation is contained, property prices have eased and we are already in the midst of a consumption slowdown resulting from a combination of the anti-corruption campaign and an economic slowdown. The government is making progress on structural reforms such as Hukou reform as well as setting up local asset management companies to tackle Local Government Financing Vehicle problems.”

“Going forward, the improving macro economy and further reform announcements are the key catalysts for the market in the second half of the year. We are positive on the outlook and well positioned for a cyclical recovery with exposures to property, high beta mid-sized banks and diversified financial companies. We also favor the consumption and technology sectors which will likely benefit from the long-term structural changes in the economy.”

The Fund is managed by members of a 34-strong investment team focused on Greater China, with investment research support from China International Fund Management, a joint venture between JPMAM and Shanghai International Trust Co., Ltd.

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