Should Renminbi Funds Join MPF? On the Eve of the Offshore RMB Bond Boom

By August 2011, the offshore renminbi market was maturing: RMB deposits were ~7% of Hong Kong deposits, expected to hit 20% within years, and the offshore RMB bond market was entering rapid growth. Author Mark Konyn (RCM Asia Pacific CEO) argued that in time, MPF members should be able to put part of their long-term savings into RMB assets.

What’s the appeal of RMB bonds?

Currency appreciation plus coupon — a double return. After conversion limits were relaxed in July 2010, mutual funds and institutions could trade RMB freely in Hong Kong’s interbank market; offshore funding costs were strikingly low, and trading plus new issuance surged. Annualised, the RMB rose over 7% against the dollar that year, with 5%–7% annual gains expected ahead — attractive on currency alone for dollar investors, with bond yields on top.

Can you buy RMB funds now?

Yes, but only RMB share classes. RMB bond funds approved for sale in Hong Kong were then limited to RMB share classes, open only to Hong Kong investors with RMB accounts; dollar share classes went mainly through private banks to offshore investors. The authorities had not said these funds would join MPF.

When will MPF offer them?

Unknown at the time. As RMB internationalisation and convertibility advanced, offshore investors’ RMB holdings would only grow — RMB funds in MPF looked like a matter of time. See current MPF fund choices at MPF fund comparison.