Baring Asset Management has launched the Baring China Bond Fund, which aims to maximise total return over the long-term, consisting of income, capital appreciation and currency gains, by investing in China-related debt securities and Renminbi (RMB) denominated debt securities.
The fund is managed by Sean Chang, head of Asia debt, who joined the firm this year and has over 20 years’ fixed income investment experience across the major Asian markets. Chang is based in Hong Kong.
Barings believes that the Chinese authorities’ apparent commitment to open up China’s capital markets and transform the Renminbi into a global currency offer significant long term potential for investors. The growth of the offshore Renminbi bond market over the last 18 months has enabled fixed income investors to obtain direct exposure to RMB-denominated debt assets, an area of investment that Barings expects to grow considerably over time.
Chang says: “The expansion in RMB issuance is adding to the depth and diversity of this increasingly important asset class, which also offers a comparatively high yield when compared with developed market sovereign debt. We believe that the RMB currency provides the opportunity for long-term appreciation when compared with developed market currencies.
“The increase in bond issuance in China has been matched by a marked increase in demand as investors seek access to the expected long-term appreciation of the RMB. While the RMB has recently been allowed to strengthen against the US dollar, our view remains that the currency remains structurally undervalued with significant potential for appreciation relative to not only the US dollar, but all other major currencies.
“We believe the combination of a clearly defined and disciplined investment process with a strong focus on risk management should produce high risk-adjusted returns. The China yield premium is higher than those in other Asian markets, and coupon income and capital gains should underpin strong bond performance.”