Asset managers to gain more leeway

Securities market access set to be widened in a more gradual manner

China will continue to open the onshore securities market to foreign asset managers and will grant them wider access to the market in a gradual manner, said an official of the Asset Management Association of China.

The official was responding to a media report saying that the Chinese securities regulator recently barred foreign asset managers from selling products that invest in global markets to local wealthy customers through "verbal instruction".

China's policies and regulations on foreign private asset managers have not changed under a pilot program launched in 2016 that allows global firms to set up wholly foreign-owned enterprises to raise onshore funds and invest in the onshore securities market, according to the official, who spoke on condition of anonymity.

Under the current rules, foreign asset managers are required to register and file their onshore products at the AMAC before conducting business in China.

The program of foreign fund managers does not involve cross-border investment and products that invest in overseas markets, which was publicly stated by the securities regulator, according to a legal expert from Llinks Law Office.

The launch of the program is part of China's effort to open its multi-trillion dollar asset management industry to international players who previously could enter the market by owning a minority stake in a joint venture with a local Chinese partner.

The program is designed to offer foreign asset managers greater access to the onshore securities market and allow them to tap into the booming wealth of Chinese investors and their increasing demand for sophisticated tools to invest in the domestic market.

When it comes to cross-border investment, Chinese investors are able to invest their wealth in overseas markets through the Qualified Domestic Institutional Investor (QDII) program.

The arrangement of mutual recognition of funds between the mainland and Hong Kong approved by the securities regulators in 2015 is another channel for mainland investors to allocate their assets in overseas markets.

China's top leadership has pledged to further open the economy including the financial industry to foreign players in an orderly way. It is evidenced by the regulator's decision to further relax shareholding restrictions on foreign investors in the domestic mutual fund management companies and securities firms.

Global asset managers have expressed bullish sentiment toward the long-term prospects of the Chinese economy and its stock market and they said they will seek to expand their onshore business.

"Given the improving corporate earnings and the upcoming inclusion of A-shares into the MSCI Emerging Markets Index, we believe more capital will flow into China and will push the development of the onshore market," said a spokesperson of Schroders Plc.

UBS Asset Management echoed the optimistic view on the Chinese stock market given the country's solid economic fundamental and the innovative potential.

"We expect the Chinese companies will have a significant advancement in innovation and some of these domestic leading companies will become leaders globally. We are confident that the Chinese market has a strong growth potential in the long term," the firm said.

The Swiss firm launched its first onshore private fund investing in the A-share market through its locally incorporated asset management company in Shanghai in November 2017. The firm said it will soon launch a fixed-income product and will continue to enrich product spectrum in other asset classes to meet client requirements.

Fidelity International, the first foreign asset manager that gained the qualification to sell onshore funds to Chinese investors, said it will boost its research and investment capability in the mainland's market over time, which will enable it to offer tailor-made products and services to its local customers.