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Enoch Yiu

Fund management veteran pursues mainland potential
David Lui Yin-tat is one of those Hong Kong professionals who go to the mainland to work only to find that the market's potential is so big  they  cannot possibly go  home.
As chief executive of Bank of Communications Schroders Fund Management,  he splits his life between two cities. Monday to Friday is spent in Shanghai and  weekends in Hong Kong.
Spending so much time in airport lounges is not easy but the 57-year-old has no regrets; the opportunities  on the mainland  are too great to miss.
London-based Schroders dates back to 1804, but its joint venture with the mainland's fifth-largest lender  is only two years old.  In that time it has launched five funds with a total size of 60 billion yuan.
Bank of Communications has a 65 per cent stake in the venture, Schroders 30 per cent, and China International Marine Containers Group holds the remainder.
A graduate of the London School of Economics, Mr Lui joined Schroders' Hong Kong in 1985 to manage its Hong Kong and Asian funds.
Before taking on his chief executive role in 2005, Mr Lui had been executive director and vice-chairman of Schroders (Hong Kong) for five years.
He is also a fellow director of the Hong Kong Securities Institute and  was formerly a member of the listing committee of  Hong Kong Exchanges and Clearing.
As a fund manager in Hong Kong for 25 years, why did you decide to take up the job  in Shanghai?
When the company set up the joint venture  in 2005, it was important to find  a chief executive acceptable to both partners. I was the  choice of both Schroders and Bank of Communications as they trusted me.
As a Chinese national, [taking the job] was a matter of national pride because you like to see the mainland doing well. During the past few years, I have witnessed  the mainland developing  its fund industry and it is a privilege to be involved.
How do you split your time between Shanghai and Hong Kong?
I fly to Shanghai every Monday morning and fly back to Hong Kong every Friday afternoon. My children have grown up and have their own jobs so it is no problem for me to work in other cities. Luckily the flight time is not that long.
How do you compare life in Shanghai  with Hong Kong?
There is not much difference. Shanghai has a lot of development just like Hong Kong. I do not go out at night but spend time watching TV. It's good practice for my Putonghua.
Will more Hong Kong fund managers move to the mainland?
It is natural that more fund houses will open   on  the mainland. The  market is far bigger than Hong Kong's. In the mainland, the largest fund company has 260 billion yuan under management. There are  few fund houses of that size in Hong Kong. There also are not many  firms in Hong Kong that can raise 30 billion to 50 billion yuan in one day, but you can do it easily  on  the mainland. This is why many international fund companies have  established a presence.
Do you think Shanghai will surpass Hong Kong's fund industry?
There is no doubt about that. Shanghai is the financial  hub of China. Hong Kong is a major city, but Shanghai is the centre.
What are the plans for your fund house over the next few years?
We are  young, just like the mainland fund industry.  We have a lot of plans, including diversifying our range of mutual funds for  retail investors. When the mainland regulator allows us, we also will manage portfolios for individual and institutional clients.
We are  applying for a licence to manage corporate annuity schemes - the mainland pension fund scheme.  Competition is fierce with 50 candidates, but the government will only issue five licences.
The company has also applied to the China Securities Regulatory Commission to launch a QDII (qualified domestic institutional investor) fund.
You took part in  drafting  the mainland investment fund law. Do you think the legislation matches international standards?
China drafted the law after wide consultation with industry experts and international fund managers. The law is comprehensive and has shareholder protection provisions that are similar to the international market.
Many mainland investors are short-term speculators. Do they like to invest in fund products?
They have to learn  to take a longer view. When we first started our company in 2005, the Shanghai Composite Index was only about 1,000 points. It was difficult to sell equity fund products to investors at  that time. Investors  bought the fund but we had to offer a lot of incentives.
After they  purchased, many of them did not stay in the fund for long. When the stock market went up, they sold. When the market went up further, these investors regretted  selling early.
When we sold the second fund, the reception was different. Investors had more confidence and they are staying for the longer term.
What types of funds are most popular?
Before the mainland stock market bounced back in mid 2005, the money market and bond funds were the most popular. But since then, equity funds investing in the A-share market have been well received.
Do you think  there is a stock market bubble on the mainland?
The mainland stock markets have gone up for several reasons. Firstly,  economic growth is one of the highest in the world, with annual increases of 10 to 11 per cent or more. Secondly, corporate earnings are also growing rapidly.
Thirdly, the mainland market had few new share issues before 2005 because there was a bearish environment and it was difficult to raise funds. Finally, the low interest rate environment encourages people to  shun bank deposits  in favour of the stock market.
People said say it is a bubble, however I think as long as the mainland economy continues to grow, the stock market is not going to have any problems.
What do you think are the major advantages of the mainland fund industry?
China's economy is substantial. Nowhere else in Asia can you find a market  of such scale.
The mainland is also in the early stages of development. Many industries, such as brokerages and fund  managers, only started in the last few years. There will be lots of opportunities for international firms.
What are the major challenges for the industry?
Foreign companies  entering the market have to understand the unique culture and background of  the country. They have to be aware of the history and  thinking of mainland people. Unless you understand all these,  you cannot understand the market.
Foreign firms have to adapt to Chinese circumstances.
Why did you join the fund industry?
I graduated in London in 1975 and was always interested in investment. I started buying shares in Merrill Lynch and airlines during my university days. Joining the fund management industry allowed me to do what I am interested in.
How do you compare the fund industry now with when you first joined?
In the old days, fund managers had to pick the stocks and  outperform the index. Now, you need to beat your competitors and must perform in the top 25 per cent of fund managers.
In the past, customers emphasised returns but now they also look at risk factors. Fund manager are also using more sophisticated  approaches to  making investment decisions.
What are the keys to  making money in the market?
My major strength is to invest when the market is down. You earn the most if you  invest in stocks that are low-risk, but offer  high returns. This happens if you find the economy is turning from a bear market to a bull market.
It is easy to identify when the lowest point in the market has been reached - people are not interested in stocks and turnover has dried up.
I remember when I was in Taiwan in the late 1980s; I could not squeeze into a brokerage as it was so crowded. That obviously was the peak of the market. Some years later, I went to the same brokerage office and found that there were only two  or three people. I knew it was  time to buy.
What should people look at when they invest?
I always look at the fundamentals, which are very important. Investors need to monitor the indicators of market sentiment and industry development.
How  do you compare yourself with 10 years ago? What do you think you will be doing in a decade?
Ten years ago, I was a fund manager in Hong Kong with a focus in Asia. Now I am a fund manager based in Shanghai eyeing  the mainland. In 10 years, I will still be an investor but I will spend more time  contributing to charity and on social work. After all, life is not only  making money, but  putting money to work and  providing  assistance to  others.



For David Lui, it pays to  be at home in two cities