Path cleared for `widespread' foreign ownership of AM firms

Added 21st June 2016

Hang Seng Bank’s majority stake in a mainland fund house signals a relaxation of rules governing foreign ownership rules in the financial industry, said Z-Ben Advisors.

Path cleared for `widespread' foreign ownership of AM firms

The Hong Kong-based bank became the first non-mainland entity to own a majority stake in the new Hang Seng Qianhai Fund Management Company, after granting approval by the regulator last week.

So far the relaxation of the majority stake held by foreign entities only applies to eligible Hong Kong-based firms.

“This is just the tip of the spear in what is a wider relaxation of foreign ownership,” the consultant firm said in a report released today.

“Widespread majority ownership should be realised as early as next year,” it said. 

A majority control of an onshore mutual fund house would allow foreign firms “full operational capability covering the widest scope of options for money management in China: retail, HNWI, institutional and even international clients can all be serviced,” the report noted.

Hang Seng’s application was filed in July 2015 under the under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). Chantal Grinderslev, director of operations at Z-Ben, noted that the approval actually came two years after CEPA rules were relaxed.

Foreign firms entering China can also choose to set up a wholly-foreign owned enterprise (WFOE) in Shanghai or Shenzhen free trade zone.

The latest upgraded WFOE, currently granted to Aberdeen, Fidelity and Bridgewater, is expected to allow foreign asset managers to run investment management businesses and raise money from onshore institutional or high net worth clients, although details are yet to be announced by the authorities.

Z-Ben expects the details of the investment management WFOE to be announced by this year. After three years of operating a WFOE, the foreign firm can eventually apply for a mutual fund license to manage onshore money, the firm added.

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