East Capital is first to invest 100 in A-shares

East Capital said its UCITS-compliant China fund has become the first to be allowed to invest up to 100% of its portfolio in Chinese A-shares through the Stock Connect program.

Portfolio Adviser


The Grand Duchy’s financial regulator, the Commission de Surveillance du Sector Financier (CSSF), has given East Capital (Lux) approval to significantly increase its allocation to Chinese domestically-listed stocks.

The Hong Kong-Shanghai Stock Connect program was launched in November last year and was designed to open up investment opportunities in China by enabling mutual trading access between the Shanghai and Hong Kong stock markets.

“The Chinese domestic market has undergone a number of reforms which bodes well for the future inclusion of A-shares into global benchmarks,” said East Capital. “This is expected to take place in the not-too-distant future, which due to the size of the market would have a major impact in terms of flows.”

East Capital’s Asian operations are managed from its offices in Stockholm and Hong Kong. Partner and co-founder, Karine Hirn, has led the firm’s operations since 2010.

“Hands-on approach”

Hirn said: “We believe this market is fascinating for several reasons. There is a wide range of interesting and often privately held and entrepreneur-driven companies in sectors such as healthcare, consumer goods, services and specific industries that are listed on the A-shares market.

“The Chinese companies listed in Hong Kong, so-called H-shares, are more often larger companies, state owned enterprises and banks.

“Our investment team spends a lot of time visiting companies on the ground to identify good investments, and monitor holdings,” she added. “This hands-on approach is key to minimizing the risks on this market that are still very high, notably in terms of quality of issuers and transparency.”

In comparison to the firm’s China fund, the East Capital (Lux) – Emerging Asia Fund can only invest up to 30% of its portfolio through the Stock Connect program.

As the first Nordic asset manager to get a Qualified Foreign Institutional Investor (QFII) licence, East Capital has been investing more than $100m (£68m, €95m) on the A-shares market since the end of 2013.

UCITS were authorised for use via Stock Connect in December last year.

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