HSBC begins retail fund targeting China consumption

HSBC Global Asset Management believes retail investors in Hong Kong – where shops are filled with mainland tourists at the weekend – will put stakes into a new China consumer-focused fund.

It is selling HSBC Global Investment Funds – China Consumer Opportunities as Hong Kong’s first global equity fund that invests in both domestic and overseas companies that benefit from mainland consumption. The fund will be managed by a global team, including staff in Hong Kong.

“China has been a favourable investment destination for many Hong Kong investors,” says Bruno Lee, regional head of wealth management Asia-Pacific for HSBC. It is targeted at retail investors who have a positive long-term view on China’s economic growth, he adds.

Several consumption-themed funds focused on individual Bric countries – in particular, China and India – have been launched by private equity funds over the past decade.

“In the retail space, there are not too many consumer funds registered in Hong Kong,” says Edmund Chong, director and head of sales of wholesale business, Hong Kong, at HSBC Global Asset Management.

China Consumer Opportunities will invest in stocks of mid- and large-cap companies across a broad range of sectors, including automobiles, electronics, sports, fashion, food, department stores and jewellery.

Between 50-70% of the fund’s assets will be invested in global luxury brand stocks, while 30-50% will be allocated to local and global brands in the lower to mid-tier, says Chong. “We are targeting the whole value chain.”

HSBC cites current estimates that China will overtake the US to be the world’s top nation in terms of consumer spending by 2020, when the country’s middle class is expected to reach 700 million, from the present 400 million.

The fund is available in US and Hong Kong dollar share classes, with a minimum investment of $1,000, or HK$10,000. The initial public offering ends on September 23. HSBC has tentative plans to offer the fund regionally, after gauging investor interest, says Chong.

In February this year, Fidelity International launched its retail-focused China Consumer Fund in the UK, which was followed in recent months with Hong Kong and Singapore dollar share class offerings. It invests in Greater China stocks that develop, manufacture or sell goods or services for Chinese consumers.