By Juliet Samuel
LONDON--A Chinese state-owned bank Wednesday listed the world's
first international money-market fund priced in China's
currency.
The fund will allow international investors to receive the yield
from a mixture of short-term Chinese bonds that are currently hard
to access outside China.
China Construction Bank struck a deal with Commerzbank AG to
launch the exchange-traded money-market fund in London, in what the
Chinese bank said would be the start of a major expansion in
Europe.
The fund is open to all European investors and will buy Chinese
bonds that typically allow only limited access for foreign
investors. China is promoting the renminbi, or yuan, as an
international reserve currency, based on its increasing use in
global trade. The ETF follows the opening of a high-yield bond fund
to European investors by Bank of China Ltd. and Citigroup Inc. in
London last year.
"Europe is a very important market and we see a very big
opportunity in terms of renminbi internationalization," said Tony
Hung, executive director of CCBI Asset Management, the
asset-management arm of China Construction Bank. "It's very
exciting to open ourselves up to European investors."
CCBI Asset Management hopes to launch a string of other products
that give European investors access to the Chinese currency, Mr.
Hung said. He didn't give details. The London Stock Exchange so far
has four other ETFs that give European investors access to onshore
Chinese markets, typically in stocks.
Europe is a natural first market for CCB to target outside Asia,
Mr. Hung added, because it is close to China and has the right
infrastructure. Last year, CCB was given permission by Chinese
authorities to clear renminbi-denominated trades in London.
"Once we've got the European business... to a more mature
status, the next thing to look at would be the U.S.," he said.
Mr. Hung said there is strong demand for products like
money-market ETFs from yield-hungry European institutions, such as
pension funds and hedge funds, as well as businesses that trade
with China and have pools of renminbi offshore that they struggle
to invest. Retail investors can also buy shares.
Commerzbank is acting as guaranteed market maker for the fund,
ensuring investors can always buy and sell its shares, and has
helped to market it in Europe.
It was listed on the London Stock Exchange on Wednesday morning
to take advantage of the city's deep foreign-exchange markets.
Andrea Leadsom, a minister at the U.K. Treasury, was at the launch,
underlining the U.K. government's efforts to court Chinese
investment. Britain was recently the first western nation to agree
to become a founding member of the Chinese-led Asian Infrastructure
Investment Bank, an institution seen as a rival to the World
Bank.
"The launch of this innovative new product... underscores
Britain's position as the western center for offshore [renminbi],"
said Ms Leadsom. "It's also yet another example of the good
relationship between Britain and China."
The fund will make use of a quota allotted by Beijing that
enables it to buy 1 billion yuan's ($163 million) worth of debt in
the onshore Chinese market, with a maturity of up to six months. It
aims to offer a yield of up to 3.5% after annual fees of 0.65%, and
its shares were priced initially at 100 yuan each.
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