JP Morgan AM launches RQFII A-share fund

JP Morgan Asset Management yesterday opened subscriptions to its new actively managed fund launched under China's renminbi qualified institutional investor (RQFII) scheme.

The JP Morgan China A-Share Opportunities Fund will initially be available through five distributors, including Chinese banks and independent financial advisers.

The firm is in talks with private and retail banks, insurance companies and independent advisers, some 10 of which have finished due diligence for the product. “We target to put our product on the shelves of up to 20 distributors by the end of this month,” said Ancus Mak, vice president of retail distribution.

The fund will use Rmb500 million ($81 million) of the Rmb1 billion in RQFII quota the firm received in January. At least 70% of the fund will be invested in A-shares.

Up to 10% can be invested in Chinese equity funds, including exchange-traded funds; 15% in B-shares; and 30% in H-shares and US and non-Chinese equities, including ETFs. 

“We would like to widen the product offerings for RQFII products that currently tend to invest in fixed income or are passively managed,” said Mak.

JP Morgan AM holds a bullish view on China. It argues that inflation is contained, property prices have eased and that the government is making progress in its anti-corruption drive and structural reforms. The firm favours the consumption and technology sectors.

That sentiment chimes with the findings of recent surveys by the Hong Kong Investment Funds Association and Bank of America-Merrill Lynch.

But there remain widespread concerns about China's slowing domestic economy, its shadow banking industry and problems lurking in mainland debt and property markets.

“We believe that further liberalisation of China’s A-share market will gradually change the investor profile,” said Lilian Leung, manager of JP Morgan AM's new fund. “At the moment, retail investors in that market account for as much as 80% of market turnover and tend to focus on small- to mid-cap stocks.

"Therefore some big-cap names might be undervalued, and greater participation from foreign and institutional investors could support a potential re-rating of the market.”

A team of 34 will manage the fund, which is available in Hong Kong dollar and renminbi share classes, drawing on research from China International Fund Management, a joint venture that JP Morgan AM set up with Shanghai International Trust.

JP Morgan AM already runs a QFII fund, the JP Morgan China Pioneer A-Share Fund, which it launched in 2006.