Barings targets RMB rise with China bond fund launch

Barings is set to launch a China bond fund for its new head of Asian debt Sean Chang as it aims to capitalise on the long-term appreciation of the renminbi.

Chang, who joined the firm from HSBC in May 2012, will use the new dedicated China bond fund to invest in China-related bonds and RMB-denominated debt.

Barings said the fund, which is subject to regulatory approval, will capture the possibilities created by increased moves to internationalise the Chinese currency over the past 18 months.

There has been marked increase in demand, Barings said, as investors have sought to gain access to the expected long-term appreciation of the RMB, which up until 2007 had been more tightly controlled by the Chinese authorities.

Despite a recent strengthening of the RMB against the US dollar, Barings said it believes the currency is still structurally undervalued with a huge potential for appreciation against other currencies.

Commenting on the proposed fund launch, Chang said: ‘China’s offshore bond market remains in its early stages, but it is growing at a rapid pace and we believe it represents a new and exciting way for investors to participate in China’s long-term economic expansion.’

In addition to providing the potential for currency appreciation over the long term, Chang added China bonds also offer attractive income-generating qualities for yield-seeking investors, particularly in the current low global yield environment.

The proposed China Bond fund follows shortly after the launch of the Asian Debt fund, which is also managed by Chang.

Alongside announcing the Baring China Bond fund, the asset management company also revealed it is currently seeking regulatory approval for the Baring Emerging Market Corporate Debt fund.

This shows a growing trend among asset management firms, with both Swiss & Global AM and Pioneer Investments announcing funds in this sector over the past couple of weeks.