Taipei, April 23 (CNA) Fubon Asset Management Co. said Tuesday that it has obtained a green light from the Financial Supervisory Commission (FSC), Taiwan's top financial watchdog, to raise two Chinese yuan-denominated bond funds in Taiwan.
Fubon is the second local fund management company to be allowed to raise yuan-denominated mutual funds since yuan transactions started in Taiwan in early February.
Fuh Hwa Securities Investment Trust Co. served as the pioneer business by securing FSC approval in early April to raise two mutual funds in the May 6-17 period.
Fubon said it is planning to raise two yuan-denominated mutual funds -- Fubon China High Yield Bond Fund and Fubon China Investment Grade Bond Fund -- during the June 17-21 period, with the fundraising ceiling for each of the two funds set at 5 billion yuan (US$806 million).
Fubon said the Fubon China Investment Grade Bond Fund will target investment-grade yuan-denominated funds, while the Fubon China High Yield Bond Fund will eye non-investment-grade bonds for higher returns.
Fubon said the launch of the two mutual funds is expected to provide local investors with more alternative investment instruments in addition to the option of placing their funds in yuan deposits.
From Feb. 6, domestic banking units (DBUs) of banks operating in Taiwan have been allowed to conduct yuan transactions, such as deposits, lending and remittances, after a currency-clearing mechanism across the Taiwan Strait was established.
Before the mechanism was put in place, only the offshore banking units of Taiwanese banks could conduct yuan transactions.
Fubon said that as China allows more flexibility in the yuan's fluctuations against the U.S. dollar, the Chinese currency is expected to appreciate in the future, which will pave the way for higher bond prices.
The asset management firm said this favorable development offers a good investment opportunity for local investors willing to put their funds into the China bond market.
(By Pan Chi-I and Frances Huang)