UPDATE 1-Guosen Securities raises yuan China PE fund in HK

Thu Jan 13, 2011 9:43pm EST
* PE fund to focus on China's agriculture-related business
* Yuan-denominated funds in Hong Kong seen heating up
* Another step in the rapidly expanding yuan asset market
(Adds details)
By Victoria Bi

HONG KONG, Jan 14 (Reuters) - China's Guosen Securities Co
Ltd will raise a $300 million yuan-denominated private equity
fund in Hong Kong to meet growing demand for yuan investment
products in the territory, sources with direct knowledge said.
Guosen Securities (HK) Asset Management Co Ltd would manage
the fund, the first yuan-private equity fund of the group, which
would invest in Chinese agriculture-related businesses, the
sources said on Friday.

Shenzhen-based Guosen Securities, ranked the top brokerage by
the China Securities Regulatory Commission from 2006 to 2009,
plans to tap into the agriculture sector which is set for a
speedy transformation phase in the next five to 10 years amid
rising food prices, said a source who declined to be named as he
was not authorised to talk to the media.
The move comes a day after sources told Reuters that at least
10 asset managers are preparing to launch yuan-denominated funds
in Hong Kong, an indicator of the growing demand of such assets
among global investors.

At least 10 of them, including the fund unit of HSBC
(0005.HK) (HSBA.L), are planning the launch while Guotai Junan
Securities Co has said its Hong Kong unit was preparing a yuan
fund, sources told Reuters on Thursday. [ID:nTOE70C038]
The yuan's fast-expanding role in overseas trade has sparked
a boom in yuan deposits in the former British colony leading to a
surge in demand for renminbi-denominated assets.

Yuan circulation in Hong Kong totaled 280 billion yuan ($42.3
billion) at the end of November, and in an effort to create an
offshore market for yuan products, China has allowed global
institutions and companies, including the World Bank, McDonald's
Corp (MCD.N) and Caterpillar (CAT.N) to issue yuan-denominated

In addition, China may let companies conduct yuan-denominated
IPOs in Hong Kong, and is also planning to allow offshore yuan to
be invested in the mainland under the so-called mini-Qualified
Foreign Institutional Investor (mini-QFII) scheme.

Overseas demand for yuan assets is also driven by
expectations that China may allow the yuan to appreciate faster,
with some economists forecasting a 6 percent rise in the
currency's value this year. (Editing by Jacqueline Wong)
Source: Reuters.Com