Next three years crucial for wealth management sector

Yang Dong, CEO of Star Wealth Co [Photo provided to China Daily]

China's wealth management industry will see rapid growth under the "Internet Plus" drive, whereas interest rate liberalization will ensure healthier development, said an industry veteran.

"The next three years will be crucial for the industry," said Yang Dong, CEO of Star Wealth Co, adding that as asset pricing moves to be more market-driven and as regulations mature, players will be able to walk away from price war or implicit guarantee, and compete on the basis of their professionalism.

China's central bank unveiled a new guideline targeting online financing activities in July, encouraging innovations while setting out measures to ward off potential risks.

The rules set out different regulatory responsibilities for each financial regulator, where the People's Bank of China will supervise online payments, and the China Banking Regulatory Commission Internet loans, trust funds and consumer finance.

More specific rules will be released later by different regulators, according to a statement on the central bank's website.

"Market players with lawful wealth management products and a long-time operation goal always applaud regulations that would force unlawful platforms into closure and pave ways for the rest," said Yang.

The Shanghai-based Star Wealth Co oversaw more than 5 billion yuan assets by the end of 2014, according to the company's website. It offers wealth management products that invest in real estate market, secondary equity markets, and movie productions.

Here we present an exclusive interview with Yang Dong about his insights into the new regulations and investment opportunities around.

Q: How do you see China's real estate market in the second half of the year? How will it affect property-related investments?

Yang: Development of new housing projects is still weak. Price rebound in first-tier cities such as Beijing, Shanghai and Shenzhen is not equally felt among developers, as they've been busy de-stocking and tackling debt issues.

Star Wealth's property-related investments focus on housing projects that are in first-tier cities and are upon completion or pre-sales stage. For projects at downtown of second-tier cities, we would consider those with favorable collaterals. As it's difficult to form an accurate long-term view, the investment span should be no longer than one year.

Q: The investment momentum in China has been shifting from property to equities over the last two years or so. However, as the A-share bull was challenged, will the trend reverse? How will stock performance affect asset allocation decisions among retail investors?

Yang: The impact of recent A-share rout is obvious, as could be seen from the performance of wealth management companies. Back in May when stock market was heading to its peak, Chinese retail investors were unmoved by products that would earn 11 percent annual gain. Whereas, two month later, we saw a record of capital inflow in July. Investors have got a better understanding about market risks from this slide.

My suggestion would be to allocate in both markets. Stocks would be aggressive investments by all means, whereas buying a property is often seen as anti-cyclical and therefore defensive. As for how much to invest in either market, it would depend on your specific risk preference.