Advertisement
Advertisement

Foreign cash in mainland funds to double

Foreign investment in China's fund management industry could easily double in the next 18 months to 300 million yuan (HK$281.7 million), according to law firm Clifford Chance and accountancy firm PricewaterhouseCoopers (PwC).

There are signs foreign players are speeding up entry to the fast-growing industry, overcoming initial concerns about China's stringent fund joint-venture rules, opaque corporate culture and under-developed stock market.

Earlier scepticism has eased, thanks to the successful fund launch by China Merchants Fund Management (CMFM) - partly owned by Dutch financial group ING - which raised 4.5 billion yuan in the first fund sale by a foreign-invested asset manager in China, Clifford Chance partner James Walker said.

The National Social Security Fund's foray into the stock market through six domestic fund managers had added to the attraction, he said.

More than half of over 50 fund houses and other financial institutions represented at a seminar sponsored by Clifford Chance and PwC said they were forming fund joint ventures in China.

'I think there is a lot of interest in what is happening in China and the potential to manage huge sums of money,' said Robert Grome, Hong Kong-based PwC investment management industry partner.

'There is a definite competitive aspect to this,' said Mr Walker, adding that United States companies may speed up entry after European firms took centre stage in the past few months.

Thus 300 million yuan represented a conservative estimate of foreign investment in the sector in the next 11/2 years, both said.

Joint-venture fund houses have stolen the limelight from mainland fund managers this year. By the end of last year, China had 19 domestic fund managers and one foreign-invested fund manager - CMFM. Official statistics show the ranks of fund management companies have swelled to 29.

Among them are five Sino-foreign joint ventures - Fortune SGAM Fund Management invested by French bank Societe Generale, Fortis Haitong Investment Management partly owned by Belgian bank Fortis, Guotai Junan Allianz Fund Management with equity involvement by Germany's Allianz, Shanghai-based Fullgoal Fund Management which has sold a stake to Canada's Bank of Montreal, and Invesco Great Wall Fund Management with US-based Invesco as a shareholder.

Even more are in the pipeline, including Beijing's Xiangcai Hefeng Fund Management, which has waited for months for regulatory approval to let Dutch financial group ABN Amro take a stake.

This week, Fortune SGAM said it raised nearly 3.9 billion yuan through its maiden fund sale, far more than the average fund launch in Hong Kong can fetch. It and the CMFM funds ranked among the top-three selling portfolios out of 10 open-ended funds launched so far this year.

With a lower market penetration rate and rapidly expanding industry, Mr Grome described it as a given that China's fund market will eclipse Hong Kong's in terms of assets under management 'in a fairly short number of years'.

Mr Grome warned rapid fund industry expansion risked creating a bubble in the few quality stocks among 1,243 mainland-listed firms.

'The pool of experienced fund managers in China will [also] be stretched,' he said.

Post