THIS MATERIAL IS A MARKETING COMMUNICATION.
Chinese Asset Managers Embrace New Opportunities
China’s asset management industry is at a turning point as more households are expected to shift their money piled in the property sector and in banks as deposits to investment products such as mutual funds, providing lucrative opportunities for asset management firms and other financial institutions.
In this article, we will take a look at China’s asset management industry and the changes it is experiencing at present.
Rapid Rise of Investable Assets
Investable assets of Chinese households have risen by a compound annual growth rate (CAGR) of 14% over the past decade to reach RMB241 trillion in 20201, on the back of the country’s rapid economic as well as industry liberalization and transformation.
However, instead of buying investment products like people in most developed countries do, Chinese households tend to save their money as deposits or invest in the real estate market, leading to high savings and property ownership rates.
Statistics showed that as of 2019, 60% of households’ investable assets in mainland China were allocated in the property market and 24% as cash and deposits, compared to 24% of property and 15% of cash and deposits in the U.S.
While for equity investment, mainland Chinese households allocated only 8% of their investable assets, compared with 25% in the U.S. market.
Turning Point Looms
Property and infrastructure have been two key growth engines for China’s economic growth. The rapid rise of the country’s urbanisation rate from 39.8% to 60.6% in the past 15 years2, coupled with excessive liquidity have pushed up property prices sharply.
An index that tracks China’s nominal residential property prices surged 40% in the past decade. That explains why Chinese households are so obsessed with investment in this sector.
However, as the Chinese government is stepping up efforts to curb speculation in the property sector, the turning point for households’ asset allocation looms, with more assets expected to be shifted to investment products such as mutual funds, private funds and other wealth management products from the red-hot real estate market.
From the recent Evergrande’s incident, we can see the Chinese government’s policy direction that a “house is for living, not for speculating (房住不炒)”. We also believe the government is on its way to becoming less reliant on property investment so as to achieve more sustainable economic growth.
Asset Managers Embrace New Opportunities
Chinese banks have historically adopted a flow-driven approach that focuses on distributing wealth management products and collecting hefty subscription or sales fees. This model is being challenged by emerging online platforms and third-party wealth management institutions that offer huge discounts on fees, differentiated product mix and strong traffic, especially in mass market share.
In order to fully capture opportunities arising from the government’s recent regulatory reset, some market-oriented retail banks and leading brokers have started to transform from a product distribution model to one that focuses more on assets under management (AUM), especially in high net worth (HNW) market, where they can leverage deep product offerings from all channels to strengthen the value-added asset allocation service.
In addition, financial institutions are also embracing the trend of digitalization which is led by younger investors who are naturally attracted to more tailored content, tools and products with innovative features. Though online platforms and fintech companies are taking the lead on this front, some financial institutions are also investing heavily in technology solutions to optimize their mobile app experience while piloting an AI-empowered investment advisory service.
We believe this innovation-driven industry transformation will continue despite the tightening regulatory environment recently which aims to protect customers’ data privacy and safeguard the interests of retail customers.
Staying Ahead with Mirae Asset’s Latest Insights
1 J.P. Morgan, June 2, 2021
2 Caixin, April 3, 2021
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2023. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.