Chinese Investors Flock to Hong Kong Mutual Funds Amid Bond Yield Decline

Chinese investors are heavily investing in Hong Kong mutual funds that focus on overseas bonds after authorities expanded a trading channel. The demand surge, driven by declining Chinese bond yields and currency lows, is leading funds to quickly reach subscription limits under the Mutual Recognition of Funds scheme.

Amid a climate of declining yields in China’s bond market and a devalued yuan, Chinese investors are purchasing significant amounts of Hong Kong mutual fund products targeting overseas investments, with a focus on bonds. This trend follows the expansion of a cross-border trading channel by authorities, opening avenues for enhanced yields.

Several Hong Kong-registered mutual funds, available to mainland investors, were reported sold out within just 24 hours of becoming available for subscription. This rush occurred after China relaxed the rules for Hong Kong funds selling to mainland investors under the Mutual Recognition of Funds (MRF) scheme, raising the sales quota to 80% of the total fund assets from a previous 50% limit starting January 1.

The strong demand reflects growing interest in overseas investments as domestic bond yields hit record lows. Notably, JPMorgan's Global Bond Fund and Asian Total Return Bond Fund, along with others, have had to temporarily halt new subscriptions due to their rising popularity.

(With inputs from agencies.)