Baring Asset Management plans to launch a China bond fund to maximise total returns from income, capital appreciation and currency gains.
The fund will aim to benefit from the growing market for offshore renminbi bonds, also known as “dim sum” bonds, which have become popular among foreign investors looking for exposure to the Chinese economy and possible appreciation of the renminbi against other global currencies. Barings head of Asian debt, Sean Chang, commented: “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, we believe that China bonds also offer attractive income-generating qualities for yield-seeking investors, particularly in the current low global yield environment.”
According to Barings, the renminbi is structurally undervalued with huge potential for appreciation relative not only to the US dollar, but to all other major currencies. The launch of the Baring China Bond Fund is subject to regulatory approval.