Foreign Funds Boost A-Shares With New Products

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The closing months of 2024 are shaping up to be particularly significant for foreign public fund companies as they prepare to launch new investment products ahead of the upcoming yearRecent announcements from Fidelity and BlackRock have caught the attention of investors, with both companies set to release equity-based products starting in January 2025. Furthermore, Fidelity’s Low-Carbon Growth Mixed Fund has already commenced operation at the end of December this yearSeveral foreign institutions have expressed optimism that the A-share market will provide a conducive environment for active management in 2025, buoyed by factors like recovering corporate earnings, reasonable stock valuations, and robust policy support.

This surge in foreign fund activity reflects a renewed confidence in China's equity marketThe momentum has been building since the final quarter of this year, as various foreign public funds have actively expanded their portfolios with multiple products established, thereby reinvigorating the market

This trend suggests that foreign investors are increasingly positive about the domestic equity landscape.

On December 25, BlackRock announced its second index-enhanced fund, the BlackRock CSI A500 Index Enhanced Fund, which will be available for public offering starting January 2, 2025. Just a few days earlier, on December 21, Fidelity revealed that its first Fund of Funds (FOF), the Fidelity Renyuan Stable Three-Month Holding Mixed Fund, will start issuance on January 6, 2025. These announcements are indicative of the strategic moves foreign firms are making in positioning themselves within the Chinese stock market.

In the dynamic landscape of the financial market, the public fund arena continues to be a focal point, with particular emphasis on the movements of foreign public fundsSince the fourth quarter of this year, there has been a notable flurry of activity in the equity-based product offerings from foreign public funds, signaling a robust willingness to engage with China's financial market

This proactive approach not only breathes fresh life into the market but also exhibits the growing confidence that foreign capital has in the resilience and prospects of domestic equity.

A notable development in this regard is the establishment of Manulife’s Value-Driven Six-Month Holding Mixed Fund, which was officially launched on November 27. This particular fund embodies Manulife’s aspirations within domestic equity while aiming to help investors navigate the inevitable fluctuations of the market by encouraging a long-term investment outlookBy focusing on a six-month holding period, the fund reflects a strategic vision rooted in the principles of rational investing.

Additionally, BlackRock made strides with its market-enhancing product, the BlackRock CSI 300 Index Enhanced Fund, which was launched on November 26. The CSI 300 Index is a prestigious benchmark encompassing the 300 most liquid and sizable companies across the Shanghai and Shenzhen exchanges

This move bolsters investors’ ability to gain exposure to the broader market and aims to deliver superior returns through quantitative strategies while closely tracking the index.

J.PMorgan Asset Management also joined the fray, successfully launching its CSI 500 Linkage Product on November 11. This product, focusing on the CSI 500 Index that encompasses the next 500 companies below the CSI 300 in market size and liquidity, highlights J.PMorgan’s intention to capitalize on the potential growth opportunities within mid to small-cap enterprisesBy providing a convenient route for investors to tap into these investment opportunities, it broadens the spectrum of options available to asset allocators.

These developments indicate a flourishing public fund landscape, providing investors with diversified asset allocation tools tailored to various risk preferences and investment goals

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Furthermore, they signify foreign capital’s robust outlook toward China’s economic fundamentals and long-term growth trajectoryThe performance of these funds in the upcoming year will be closely monitored as they navigate the complex waters of the A-share market.

Looking ahead to 2025, many foreign institutions maintain an optimistic view of the A-share market, indicating that active management could thrive amidst a plethora of investment opportunities across multiple sectors.

Huang Senwei, a senior market strategist at Invesco, offered a positive perspective on the A-share market, attributing this optimism to expectations of corporate earnings recovery and fair valuationsThis sentiment is echoed by Fidelity’s Low-Carbon Growth Mixed Fund Manager, Nie Yixiang, who highlighted recent data suggesting a rebound in real estate sales, increased stock market trading volumes, and a continued rise in the manufacturing PMI

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