HSBC China Dragon Fund gets approval for repurchase mandate renewal

Chinese equity fund aims to point out hidden opportunities in fast-growing economy with daily trading convenience.

HSBC Global Asset Management has obtained approval for renewing the repurchase mandate for the HSBC China Dragon Fund. The mandate was granted by the unit-holders at the General Meeting held on 11 October 2010 and will be valid until 10 October 2011.  

Since the repurchase exercise commenced on 19 April 2010, 11,827,500 units, which are equivalent to around 3.2 per cent of the total units of the Fund, were repurchased as at 8 October 2010. The discount of the Fund’s market price to Net Asset Value (NAV) was 12.4 per cent on average during the period, according to an HSBC report. 

Bonnie Lam, Director and Head of Wholesale Business, Asia-Pacific, HSBC Global Asset Management, said: “Repurchase is a key initiative that demonstrates our effort to benefit the Fund and the investors. We have also put more resources into promoting investor education so that more investors will have a better understanding about the Fund and investing in China. While most of the China funds listed in Hong Kong are passively managed against benchmarks, the HSBC China Dragon Fund is an actively managed Chinese equity fund that aims to identify the hidden opportunities in the fast-growing yet relatively closed market with the convenience of daily trading.” 

Under the repurchase mandate, the number of units that the Fund may repurchase shall not exceed 10 per cent of the total number of units in issue on the date of the resolution.  The repurchase will be funded from the Fund’s assets.

Mandy Chan, portfolio manager of the HSBC China Dragon Fund, said: “China is a policy-led economy. Having solid understanding about how different sectors within the market are affected by government policies is the key to outperformance. We are positive on the consumption theme, including healthcare, and food and beverages, which are more accessible in the A-share market. Recently we have also increased our exposure to the infrastructure and industrial plays in response to government’s incremental investments on railway construction and economic housing.  In addition, we think the deep discounts that the financial and cyclical sectors, such as steel and cement, in the A-share market as compared with their H-share counterparts are not justified. The Fund is well-positioned to capture these opportunities with its A-share quota.”

Launched in July 2007, HSBC China Dragon Fund was the first SFC-authorised, actively managed closed-end Chinese equity fund listed on the Hong Kong Stock Exchange. The Fund invests in the A-share market through a US$200 million Qualified Foreign Institutional Investor quota of HSBC Global Asset Management (Hong Kong) Limited, and in other Chinese equity markets, including B shares, H shares and Red Chips. As at the end of August 2010, the Fund’s exposure to A shares represented more than 47 per cent of its portfolio.