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. [ID:nTOE70C038]. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Take a look at the offshore yuan market: [IDnL3E6NN0G6] Offshore yuan factbox [ID:nTOE6BE02H] PDF reports on offshore yuan: r.reuters.com/byg28q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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 bonds.

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)