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Change afoot at China's WM product landscape

Change afoot at China's WM product landscape

In September, China Securities Depository and Clearing Corporation said it would allow bank wealth management products (BWMPs) to invest directly in the stock market.

This could be a game changer for both the banking and asset management industries.

The landscape is likely to change at the BWMP issuer-level with many banks establishing their own asset management arms to manage these products as they move away from channel business, says a spokesperson from PwC's Asia Pacific Asset & Wealth Management Market Research Centre.

Many banks already have stakes in fund management companies, and they may now question the point of having multiple asset management entities.

There are several options for them to consider. First, they could divest their stakes in existing fund management companies, providing buying opportunities for domestic and foreign players alike.

Second, they could neglect their existing fund management companies and focus on their asset management arms instead.

Finally, they could split the focus of their multiple asset management entities. This way, their asset management operations could focus on BWMPs, while their fund management companies could focus on public funds, segregated accounts, and their other subsidiary products.

 

Furthermore, China Banking and Insurance Regulatory Commission said the regulator may grant direct stock market access to BWMPs sold publicly by banks’ wealth management subsidiaries in future regulations.

As both issuers and investors become more familiar with new regulatory changes, further developments are likely. However, it remains to be seen how investors respond to this development.

Part of the attraction to BWMPs is their relative and perceived low-investment risk into fixed-income and other low-risk  investments.

BWMPs had assets under management of RMB29.54 trillion ($4.29 trillion) with about 93,500 products outstanding for 2017. The amount raised for BWMPs reached RMB173.59 trillion ($25.19 trillion) across 257,700 products in 2017.

1. ‘Quasi’ managers include bank WMP (largely delegated), FMC subsidiary, Futures AM, Securities AM, Trust (all mainly ‘channel’ business). ‘Professional’ managers include private funds, mutual funds (including segregated accounts) and insurance AM (all mainly ‘active investment’)
2. Including private securities funds (mainly secondary market investment); private equity/venture capital funds (mainly primary market investment) and others (e.g. investment in art, wine, etc.)
3. 2017 Q3 data is used as year-end data is not yet published at time of writing
 

 

This article was first published in the November issue of the Citywire Private Wealth magazine.

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