Foreign AMCs see opportunity in China

The relatively higher volatility in the A-share market this year has not hampered international asset managers' expansion in China's capital market.

New York-based asset manager Neuberger Berman said in a news release on Monday that it has received approval from the China Securities Regulatory Commission, the country's top bourse watchdog, to begin managing local currency-denominated mutual funds for domestic Chinese clients.

With the approval granted by the CSRC in September 2021, Neuberger Berman became the second foreign institution to set up a wholly owned mutual fund business in China.

"China is the world's second-largest capital market and the country's commitment to opening up high-quality financial services will bring significant opportunities for local investors," said Patrick Liu, CEO of Neuberger Berman Fund Management (China) Ltd.

Neuberger Berman's first product to be launched in China may focus on fixed income investment by combining the company's multi-asset management strategies, as reported by China Securities Journal on Tuesday.

Environmental, social and governance investment, or ESG, may be one focus of Neuberger Berman in China, as Liu has stressed the company's expertise in this area.

Charles Nguyen, managing director for public equities ESG investing, will be relocating from New York to Shanghai to lead the firm's ESG efforts across Asia. In July 2022, the firm appointed Edward Fang as head of ESG research.

On Nov 18, Manulife Investment Management (Singapore) Pte Ltd, a subsidiary of Canadian insurance and financial services group Manulife, acquired a 51 percent stake from Tianjin Teda International Holding in Manulife Teda, according to the CSRC announcement. Manulife Teda has thus become the first wholly owned mutual fund company transferred from a joint venture.

China lifted the ownership limit on foreign asset managers in April 2020. There are now four wholly foreign owned mutual fund businesses doing business in China, including industry giants such as BlackRock and Fidelity International.

The world's largest asset manager BlackRock — with assets under management surpassing $10 trillion as of the end of 2021 — became the first foreign institution to obtain approval from the CSRC in June 2021 to set up a wholly owned mutual fund business in the country.

To date, BlackRock has rolled out three equity-themed products in China, extensively investing in the A-share market, the Hong Kong stock market and high-end manufacturing companies. However, the three products have reported negative returns ever since their establishment.

The less-than-stellar A-share market performance so far this year, with the benchmark Shanghai Composite Index shedding more than 13 percent since January, is one major cause for the less satisfying performance of BlackRock's products, according to industry experts.

In contrast to the high-flying inflation and monetary tightening in overseas markets, China has greater investment value given its economic resilience and room for further policy adjustments, said Tony Tang, BlackRock's head of China operations, who expressed a positive outlook on the long-term performance of Chinese assets.

Cheng Shi, chief economist of ICBC International, said during an industry forum on Sunday that risk assets such as stocks and bonds have all been affected this year, which is mainly due to the smaller risk appetite worldwide. The risk appetite may change after the US Federal Reserve meetings on monetary policy in 2023. The direction of foreign capital may be diverted next year, as they are already closely watching the Chinese capital market.