Rachel Wang, Morningstar
Following the launch of standardisation guidelines for asset management products, the China Securities Regulatory Commission (CSRC) is expected to continue tightening market rules in order to control the country’s booming asset management industry and to minimise financial industry risk, Wang told FSA.
The more transparent and better-scrutinised environment will benefit foreign asset managers in China, she said. “Sino-foreign enterprises are generally more prudent in designing their products and operations, so they will be less impacted by the frequent regulatory moves made by the Chinese authorities,” she explained.
“Apart from bringing down risks, the asset management industry will see a fairer competition and more regulated products in the market.”
While domestic firms adapt to the frequent changes in rules, joint ventures should think about how they could stand out among peers with their specialisations.
“Under today’s fierce competition, the winning quality in the Chinese market would be product differentiation,” she said.
“Foreign firms, regardless of the form of operation in China, should look more at developing global allocation experience in China under a strong demand from high-net-worth individuals.” She noted that on the mainland, nearly all of the 1,000 mutual funds invest only in the onshore equity market.
Wang said that the competition in China also propelled many asset managers to pursue asset growth, instead of developing the investment capacity and improving the protection of investor’s interests.
Last week, the CSRC took aim at irrational investment sentiment in the mutual funds market in an instruction issued to the industry. In the note, the regulator warned against “an overheating market, excessive marketing of the funds and of the portfolio managers” in the onshore market.
The notice was published after some onshore mutual funds received overwhelming demand, such as the fund managed by Zhong Ou Asset Management, a joint venture firm formed by Italian bank Unione di Banche Italiane and its Chinese partners.
It is not the first time in recent months that the regulator attempted to decelerate the expansion of the market. In December, the CSRC temporarily halted approvals for funds that plan to allocate more than 80% of assets to Hong Kong equities. The regulator reportedly held concerns over a surging Hong Kong stock market, which recently set a historical high.
