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Banking & Finance

‘Fintech’ buzzword draws buyers as 10b yuan fund-of-funds launched

Traditional financial institutions seek exposure to the emerging sector in hopes of synergy with existing businesses

PUBLISHED : Wednesday, 28 December, 2016, 3:31pm
UPDATED : Wednesday, 28 December, 2016, 10:57pm

“Fintech” has become such a buzzword in China that money keeps flowing in to assets carrying the name; the latest example is a 10 billion yuan (HK$11.15 billion) fund of funds (FOF) dedicated to this emerging sector.

Led by Hong Kong-listed fintech firm Credit China FinTech Holdings, Asia Fintech FOF was launched on Tuesday. The 11 other partners include mainly central state-owned enterprises, provincial investment funds, trust and securities firms and private equity firms.

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“China’s fintech sector was started later than the West’s but is expanding at an unparalleled pace compared with the West. It takes seconds to withdraw cash or transfer for online accounts in China, but in the West it may take a day,” Credit China Executive Director Sheng Jia said at the opening ceremony.

A DBS and EY report The Rise of Fintech in China said Asia as a whole in the first seven months of this year drew in US$ 9.6 billion of investment, compared with US$ 4.6 billion in North America and ­US$1.8 billion in Europe.

Before the Asia Fintech FOF was launched a Zhongguancun industry merger & acquisitions FOF of 30 billion yuan was the largest such fund so far. It was launched in Beijing in October and partly devoted to fintech.

Partners of the Asia Fintech FOF include Huarong Financial Holding, the Hong Kong subsidiary of a China State asset management company, Xinhua Distribution Group, Jilin Province Investment Group and Guangxi Investment Group.

All the partners said pure financial return was not their main goal. Exposure to the emerging businesses and possible synergy with each partner’s own businesses were the primary goals. The FOF, with the first-phase fund target of two billion yuan, would invest in funds that invested in mobile payment, blockchain technology, artificial intelligence, wealth management, consumer finance and similar technologies. The FOF could also invest in startups directly.

Xie Sha, a managing partner of the FOF, said the first two billion yuan could be raised very soon.

“Despite the venture capital downturn this year, raising funds to invest in fintech is not difficult. Most Chinese banks and securities are eager to own or have stakes in fintech startups, which they believe would define the future commanding heights,” she said.

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Credit China, part of the unlisted NCF Group, this month signed a memorandum of understanding with Malaysian fintech firm ManagePay Systems Berhad (MPAY). Xie said Credit China may buy equities in this firm. This followed its planned purchase of a controlling stake in Vietnamese information technology solutions provider Amigo Technologies.

Sheng said: “China pioneers in fintech so far in Asia. We are most interested in Southeast Asia’s market. We mainly seek local partners, M&A, and technology exporters to gain exposure to the market.”