Behind the birth of the first foreign-funded holding public offering: how to deal with the challenges for the followers

category:Finance
 Behind the birth of the first foreign-funded holding public offering: how to deal with the challenges for the followers


Transactions await regulatory approval

According to the property rights transfer information published by the Shanghai United Property Exchange, Shanghai International Trust Co., Ltd. intends to transfer its 2% stake in the Shanghai Morgan Fund for the period from July 1 to July 26.

It also announced the valuation price of the above-mentioned shares and the transfer floor price. Asset valuation shows that the book value of the net assets of the Shanghai Morgan Fund is 1.729 billion yuan, the corresponding valuation value of the above-mentioned transfer target is 180 million yuan, the transfer base price is 241 million yuan, and the premium is 33.88%. This equity transfer premium is high, but it is also reasonable, after all, thistailor-made2% of the equity, also means the transfer of 100 billion assets on the scale of control of the Morgan Fund. An executive at a fund company in South China said.

If the transfer is successful, the proportion of Shanghai Trusts shareholding in Upper Morgan Fund will be reduced from 51% to 49%, and the proportion of Morgan Capital Managements shareholding in Upper Morgan Fund will rise to 51%. Upper Morgan Fund will become the first absolutely foreign-owned fund company in Chinas public fund industry. However, the deal still needs to be approved by relevant US and Chinese regulatory authorities. Regulators are increasing the pace of opening the fund industry to the outside world. It is only a matter of time before the relevant procedures are completed. The executives said.

In 2003, Morgan Fleming, a fund company owned by J.P. Morgan Chase, signed an agreement with Shanghai Trust to jointly invest in the Morgan Fund. Wang Hongyan, the first general manager, led Morgan into the first echelon of the industry in three years, and then succeeded Zhang Shuolin and Wang Dazhi as the general managers of JPMorgan Chase. That is to say, if the transfer is successful, in the short and medium term, the development of Shanghai Morgan will not change fundamentally, and the degree of stimulation to the market is very limited.

More foreign investment in action

With the acceleration of the process of opening up the asset management industry to foreign investment, it can be predicted that more and more overseas investment institutions will accelerate the layout of Chinas public offering industry.

In June, the SFC approved Shenzhen Recruitment and Finance Investment Holding Co., Ltd. to transfer its holdings of Morgan Stanley Huaxin Fund to Morgan Stanley International Holding Co., Ltd. and approved Shenzhen Keystone Venture Capital Co., Ltd. to subscribe for new registered capital. After the transfer and subscription are completed, the ownership structure of Morgan Stanley International Holding Company is changed to 44%, Huaxin Securities Co., Ltd. is 36%, Shenzhen Keystone Venture Capital Co., Ltd. is 15%, and Shenzhen Zhongji Industry (Group) Co., Ltd. is 5%. This means that Morgan Stanley has been promoted to become the largest shareholder of Da Morgan Huaxin, the industrys first relatively foreign-controlled public fund.

This is not only the interest of foreign-funded institutions in public fund companies. Under the background that foreign investors can set up wholly-owned public funds ahead of 2020, Fidelity International, BlackRock, UBS and other overseas management giants have long been longing for the license of public funds in the Mainland.

Yin Lei, head of UBS Asia-Pacific and China onshore operations, said UBS was highly concerned about Chinas regulatory policy and was studying to seek a public offering licence in the hope of getting a good drink. Li Shaojie, managing director of Fidelity International China, also told reporters that the company was actively preparing to apply for a public offering licence. In 2020 or 2021, the public fund license will be obtained. As long as domestic and foreign asset management institutions can maintain the same starting line of supervision, do not engage in super-national treatment, and strictly abide by local laws and regulations in China, it is highly commendable to promote reform with a more open attitude. Wang Linggu, arbitrator of Shanghai International Arbitration Center, said.

Challenges in Chinas Market

In fact, after 13 years of opening up in the financial sector, from regulation to the market, we have gradually recognized a basic situation - on the micro level, the competition within the domestic financial system has been relatively intense enough. The competitive power of foreign capital, whether in the field of banks, securities, funds or insurance, can be said to be at an absolute disadvantage. The market share of foreign capital has experienced a significant retrogression in the past 10 years.

In this way, the financial sector has sufficient momentum and is not afraid of opening up. However, most of the joint venture financial institutions in the Chinese market suffer from a bad fate, including the divergence of opinions between Chinese and foreign shareholders and the continuing infighting among senior managers. Many foreign-funded institutions attribute it to their low voice power and inability to seek controlling shareholder status. Nowadays, the restriction of foreign capital stock ratio will be fully liberalized and the voice right will be improved qualitatively, but these are not the panaceas of foreign capital institutions.

Lets not say that if we want to acquire absolute controlling rights, without special interest arrangements, Chinese shareholders of joint venture financial institutions will not easily give up control rights, and the pace of approval will not be too fast. In addition, Chinas strategy of adapting to the penetrating supervision and operation of foreign investment institutions in the Mainland is also a difficult problem. The aforementioned senior executives of South China Public Funds said.

Xie Sheng, chief investment officer of Bisheng (Shanghai), headquartered in Singapore, told reporters that many foreign-funded institutions have promoted their own asset management experience and advanced investment strategies to the outside world after entering China, but many institutions have not realized that the soil for them to grow into capital crocodiles is very different from the Chinese market. It is very difficult to succeed in the Chinese market if we rely solely on these experiences and mechanisms.

According to a report by Ernst & Young, one of the most important pressures for foreign financial institutions to enter the Chinese market is competition from local enterprises. As a new participant in the Chinese market, how to make full use of their strengths and avoid weaknesses will be their primary task.

At the same time, under the current three-dimensional opening-up, whether the regulatory system is sound, whether the supporting mechanism can keep up, how to promote the improvement of the Chinese market with international rules, and how to prevent possible risks after the financial opening-up, all test the wisdom of the regulatory authorities. Ernst & Young expects that in the future, the regulatory authorities will continue to improve the relevant regulatory system and implement strict supervision based on the principle of consistency between domestic and foreign investment.

The shortage of excellent talent reserves is another major problem for foreign financial institutions to come to China. How to build a talent training system in line with the business development in China and the cultural development of enterprises themselves is also a challenge. At present, almost all the top talents in the financial market have been exhausted by Chinas financial institutions. Foreign financial institutions have shown a growing weakness in the talent reserve. Wang Linggu pointed out.

He believes that the first batch of senior executives of foreign-funded financial institutions have known their destiny, and they have not made enough progress; many of the backbone forces have gone out to start businesses, or joined the Internet finance or flowed to Chinese-funded institutions; unlike ten years ago, todays young generation of outstanding university graduates have enough career choices, and the salary advantages of foreign-funded financial institutions. It has drifted away and lost its appeal.

Difficult road, many different roads, now in peace?

Fidelity International offers a solution: self-training researchers and fund managers. Our researchers and fund managers in China are all internally trained. Fidelity International began to train fresh graduates from universities such as Tsinghua University of Peking University very early. In Fidelity International, it takes about eight years to train a fund manager. During this period, they need to undergo three rotations and conduct in-depth research in many industries. Li Shaojie, managing director of Fidelity International China, said. And after getting the public offering license, Fidelity International will probably develop in accordance with this model. Although this kind of training method takes a long time, it is more stable. Li Shaojie said. In addition, at present, Chinas asset management industry has formed a relatively complete set of system facilities and docking, while overseas investment institutions in the use of overseas systems and facilities can not be directly matched with the domestic system. How to transfer and deploy overseas system facilities to China and adapt to the differences in volume and speed between domestic business and overseas business will be a great challenge for overseas investors. Source: Responsible Editor of Economic Observer: Yang Qian_NF4425

Fidelity International offers a solution: self-training researchers and fund managers. Our researchers and fund managers in China are all internally trained. Fidelity International began to train fresh graduates from universities such as Tsinghua University of Peking University very early. In Fidelity International, it takes about eight years to train a fund manager. During this period, they need to undergo three rotations and conduct in-depth research in many industries. Li Shaojie, managing director of Fidelity International China, said.

And after getting the public offering license, Fidelity International will probably develop in accordance with this model. Although this kind of training method takes a long time, it is more stable. Li Shaojie said.

In addition, at present, Chinas asset management industry has formed a relatively complete set of system facilities and docking, while overseas investment institutions in the use of overseas systems and facilities can not be directly matched with the domestic system. How to transfer and deploy overseas system facilities to China and adapt to the differences in volume and speed between domestic business and overseas business will be a great challenge for overseas investors.