HSBC Jintrust Fund
Management Company, a subsidiary of HSBC based in mainland China, has launched an
on-shore Reminbi money market fund, joining a string of peers piling into the currency.

“We think money market funds will continue to benefit from government policy, which supports a high interest rate environment. Our fund aims to achieve an AAA rating with a rate of return comparable to the RMB seven-day call deposit rate and daily access," said Jackling Zhong, fund manager for the HSBC Jintrust RMB Money Market Fund. The initial public offering period of the HSBC Jintrust RMB Money Market Fund will be from 10 to 28 October 2011.

The fund aims to
achieve a relatively stable return from a wide range of liquid money market instruments
in the local market, said the firm. Managed by the local investment team of HSBC Jintrust, it will follow the same investment for HSBC Asset Management’s global liquidity portfolios, said the bank.

“With an expectation
of currency appreciation and a growing need to retain surpluses onshore for
business activities, we believe money market funds are a viable choice offering
diversification of counterparty risk, high liquidity, and competitive yields at
a relatively low cost,” said Steve Lee, chief executive officer of HSBC
Jintrust Fund Management Company.

Money market funds currently account for five per cent, or RMB118 billion of the fund industry in China, and rapid growth is predicted.

According to a recent KPMG report, Hong Kong dollar liquidity is becoming a pressing concern for the region's banks, as increasing levels of transfers to RMB erodes liquidity. The growth in local currency deposits has lagged behind Hong Kong dollar loans as customers have favoured the appreciating renminbi. In turn, the tightening of liquidity has helped to bring some pricing power back to the banks and added to the upward pressure on deposit rates as lenders compete for funds.

China's status as the world's second largest economy has lured a number foreign players to launch their own versions of RMB-linked products over the last few months. These include Saxo Capital Markets, UBS Wealth Management, Citibank, AllianceBernstein, Guinness Atkinson, Barclays Wealth and Julius Baer.