A proposed amendment to the HSBC China Dragon Fund would allow it to conduct on-market repurchases of units of the Fund. But Global Asset Management announced that the amendment requires approval from unit-holders at the General Meeting to be held on 19 October 2009.
The Fund has been trading at a discount to its net asset value for the past 12 months, with a high of 37.3 per cent in October 2008. The average discount for one month, three months and six months as at 14 September 2009 was 13.3 per cent, 15.7 per cent and 17.9 per cent respectively.
Patrick Tse, Director and Head of Strategic Business Development, Asia-Pacific, HSBC Global Asset Management, said: “When the Fund trades at a discount of 15 per cent for example, investors can in effect pay HK$85 (US$10.96) to buy assets that are valued at HK$100 (US$12.9). Unit repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the trading price and therefore narrowing the discount to the net asset value. By having the repurchase mandate in place, the fund manager can exercise the right whenever appropriate, in the best interests of the Fund and investors.”
Under the repurchase mandate, the number of units that the Fund may repurchase shall not exceed 10 per cent of the total number of units in issue on the date of the resolutions. The repurchase will be funded from the Fund’s assets.more
The Fund invests in the A-share market through a US$200 million Qualified Foreign Institutional Investor quota, and in other Chinese equity markets. The daily net asset value of the Fund is available in the next business day on the Fund’s
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