Global asset management firms bolster investment layout in Chinese market

Photo taken on April 11, 2022 shows a view of Pudong New Area in east China's Shanghai. (Xinhua/Chen Jianli)

-- Flocking to China

China has accelerated opening-up of domestic financial market to foreign capitals. The country raised the cap on the ratio of foreign shareholding in securities brokers and fund management firms to 51 percent in 2018, and scrapped that limitation in April 2020.

With efforts to further open up the financial market, China scrapped investment quotas on the dollar-denominated qualified foreign institutional investor scheme (QFII) scheme and its yuan-denominated sibling, RQFII, which further streamlines the procedures for foreign institutional investors.

Thanks to these policy supports, foreign financial institutions, including public funds and securities firms, have come in droves to enter China or boost local presence. After years of development, the QFII scheme has become a major channel for overseas investors to invest in China.

According to data from the Asset Management Association of China, of the 142 fund management companies, 47 were foreign-funded, accounting for over 30 percent, and 95 were domestic firms.

Foreign securities firms also maintain a steady pace in their Chinese business. For example, Standard Chartered Bank (Hong Kong) Ltd. obtained regulatory approval to set up a securities firm in China, after Morgan Stanley and Goldman Sachs, becoming the third wholly foreign-owned securities firm in the country.

China's commitment to high-quality development and reform and opening-up, especially high-quality financial opening-up, has provided huge opportunities for foreign financial institutions, said Jerry Zhang, CEO of Standard Chartered Bank (China).

Meanwhile, the China Securities Regulatory Commission (CSRC) has granted QFII licenses to many financial institutions recently, including Ruifeng Securities Ltd., Citadel Securities China Ltd., Quadeye Pte Ltd., Interprac Financial Planning Pty Ltd., and IvyRock Asset Management (HK) Ltd.

As of Feb. 26, the QFII licenses were granted to 742 foreign financial institutions, according to Wind, a financial information provider.

-- Going great guns

Many wholly foreign-owned public fund management firms have recently launched their first products in various types in China.

Fidelity International has recently obtained approval for its first public-offering product in China. The company's Chinese branch was officially set up in December last year, and applied for the regulatory permission for its first product in January. It only took a month for the Chinese securities regulator to review and approve the product.

"China has always been important in Fidelity's global strategy and we are delighted to go full steam ahead with our funds business. We are committed to building a better future for Chinese investors and contributing to the high-quality development of China's asset management industry, leveraging our rich global experience and expanding local team," said Rajeev Mittal, managing director for Fidelity International Asia-Pacific ex-Japan, at the opening ceremony of its Chinese branch on February 15, 2023.

The U.S. asset manager Neuberger Berman got the same regulatory nod for its first public-offering product, a bond fund with small amount of stock positions. The company gained Chinese regulatory approval to conduct retail business in the country's vast mutual fund industry in November last year.

In addition, Manulife Teda Fund Management is also set to launch a new product of hybrid fund, after Canada's Manulife Financial Corp securing approval to take full control of Manulife Teda Fund Management by buying 51 percent from state-owned Tianjin TEDA International Holding, making the previous joint venture now a wholly foreign-owned fund firm.

BlackRock, an early bird in Chinese market, has already launched four funds in China, with assets under its management totalling about 5.4 billion yuan (about 784.15 million U.S. dollars), according to Wind.

-- Upbeat on Chinese market

The foreign financial institutions' expansion in China reflects their confidence in the mid- and long-term investment potential of Chinese market amid the country's steady economic recovery, sustained growth and deepening two-way opening-up of capital market.

Kang Yong, chief economist of KPMG China, projected that Chinese economy will accelerate recovery and become a major driver in the global economy, as multiple challenges have been posed to the world economy.

In light of China's recent policy moves, the markets have many reasons to turn positive, said Lu Ting, chief China economist with securities firm Nomura, in an economic outlook report for 2023.

In terms of China's A-share market, Liu Jinjin, chief China equity strategist at Goldman Sachs, said that foreign investors are more optimistic than domestic investors, adding that the company suggested investors to increase holding of Chinese A-share and H-share stocks.

As of Feb. 26, the net inflow of northbound capital, or foreign money flowing into China's A-share market through Hong Kong, neared 150 billion yuan (about 21.77 billion U.S. dollars) since the start of this year, far beyond that of last year, underscoring the attractiveness of Chinese market.

The net inflow of northbound capital is expected to exceed 300 billion yuan in the whole year of 2023, according to a report by UBS Securities.