Taking on the world
Category: China, Hong Kong
By Hui Ching-hoo
Haitong International harbours ambitions for international expansion
Hai Tong Asset Management (HK), a subsidiary of Haitong International Securities Group (formerly called Taifook Securities Group), which is majority owned by the Shanghai-listed leading Chinese securities firm Haitong Securities, launched its first RMB qualified foreign institutional investors (RQFII) fund – the Haitong China RMB Income Fund – on January 11 this year.
Although 80% of the fund was set to be invested in debt instruments and the remainder in equities, Ben Zhang, Joint Managing Director of Hai Tong Asset Management (HK), tells Asia Asset Management that the fund will be concentrating more on fixed income products amid the equities market volatility at the moment. The company also intends to take advantage of the RQFII pilot scheme to increase its exposure to institutional investors.
Mr. Zhang says: “The RQFII fund pursues its bond investments in a conservative manner. We initially invest in high investment grade fixed income products such as government bonds, policy bank notes and corporate bonds. For instance, the yield for government-backed bonds ranges between 2.4% and 4.2%. These onshore bonds look very appealing to international investors because their yield is much higher than offshore RMB denominated bonds.”
Mr. Zhang adds that the fund will temporarily shy away from equities given that the A-share market is expected to linger at low levels for the near future. “However, we’ll keep our eyes open for quality stocks. The fund will switch part of its investment to equities if the market is lifted by the government’s stimulative policies,” he says, adding that the fund will set its sights on stocks with high dividend payouts, notably utilities and telecommunication industries, as well as some policies related equities when the time is right.
Speaking about the strengths of the Haitong China RMB Income Fund, Mr. Zhang states that the company has plenty of RMB capabilities in terms of fund-raising, risk control, asset management, as well as operational know-how. “Our asset management division is at the top end of the Chinese securities brokerage business – plus our operations are closely connected to some of China’s leading custodian banks.”
In terms of product diversification, the current rules stipulate that RQFII funds can only access bonds and equities. Mr. Zhang comments: “Predictably the Chinese government is cautious when it comes to controlling the scope of investment tools for the first batch of RQFII products. The current RQFII scheme is a pilot, so creating stability is a primary concern.”
In Mr. Zhang’s opinion, the authorities will gradually loosen constraints on the product mix of RQFII products given that the government is looking to push ahead with internationalising the RMB. In response to a remark from a senior official at the China Securities Regulatory Commission (CSRC) that the second batch of RQFII would come in different form, for example, RQFII ETF, Mr. Zhang says he would welcome the move, especially as ETF products are enjoying a surge in popularity in both Hong Kong and China.
Mr. Zhang is confident that the RQFII scheme will help bolster Hai Tong Asset Management (HK)’s overseas expansion, pointing out that the company has made remarkable progress in RMB investment services offerings to overseas investors since Haitong Securities acquired local brokerage Taifook Securities Group in late 2009.
“Our Haitong Middle Kingdom Fund ranked the fourth best performing CIES equity fund last year even though the stock market was in bearish run. And our Haitong Global RMB Fixed Income Fund is one of the largest authorized offshore RMB funds. We plan to roll out more RMB-related products over the coming months.”
Looking ahead, Mr. Zhang discloses that the next step for Hai Tong Asset Management (HK) is to increase the company’s exposure to institutional investors; he says he aims to have institutional investors make up over half of the company’s customer base in the long run.
Many overseas institutional investors have expressed interest in investing in emerging markets, including China. Also, RMB products are attracting a lot of attention not just due to the appreciation of the currency. Although Chinese asset managers may face tough competition from international players as they endeavour to capture a share of the market, Mr. Zhang is confident that local participants will have a competitive edge because of their deep understanding of the Chinese financial market.
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Company profile
Established in 1973, Haitong International Securities Group has been listed on the Hong Kong Stock Exchange since August 1996. The Group provides total quality corporate finance, asset management and brokerage services to global and local institutional and corporate clients as well as individual investors, with the aim of becoming a global player in the financial industry. |
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