Nikko AM China Onshore Bond Fund (CNH) – Redemption

Back in September 2014, I invested in Nikko AM China Onshore Bond Fund CNH”. It is denominated in CNH (Offshore Renminbi RMB or Chinese Yuan).

This fund invests primarily in RMB denominated fixed income instruments issued onshore in China. Their publicity material indicated monthly potential payouts of about 4% to 7% per annum.

I had redeemed the investment after holding it for about two and a half years. How did this fund performed for me?

Details of investment:
Date of investment was 9 Sep 2014
Cost of investment was 250,000 CNH (S$51,215)
Exchange rate between CNH and SGD was 0.2045 (1 CNH = S$0.2045)

On redemption, I got back 263,636 CNH (S$53,175) for holding it for 31 months.

Investment return is 1.45% per year in Singapore dollar term (with consideration of CNH and SGD currency rates). This actual return pales in comparison with the marketing brochure that stated a potential return of 4% to 7% per annum!

Investment return is 2.06% per year in CNH term (excluding the currency impact)

The CNH/SGD from the start of investment was 0.2045. CNH weakened 1.37% to 0.2017 at redemption.

The impact of currency rates in this case was not in my favour since Chinese Yuan (together with CNH) weakened against Singapore dollar over the period of my investment in the bond fund.

When investing in foreign denominated investment, watch out for currency movements that have a huge impact on your final return even when the underlying investment was positive in its return.

Copyright © 2017, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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