Local asset managers face intensifying competition from new wealth management subsidiaries at banks and various policy changes aimed at open up the country’s capital markets.
China’s asset management sector is set for a shake-up as more of the country’s commercial banks announce plans to set up new wealth management subsidiaries in response to rules issued by the CBIRC (China Banking and Insurance Regulatory Commission) earlier last month, according to a recent report by «Regulation Asia» (behind paywall).
The new rules require existing wealth management units to be split off from their parent banking entities to eliminate implicit guarantees on WMPs (wealth management products) and prevent the spread of risk to the broader financial system.
Plans for Independant Wealth Managers
To date, 22 of China’s commercial banks — including the four biggest state-owned lenders — have announced plans to launch independent wealth management subsidiaries, which could end up taking market share away from incumbent managers in the country’s $15 trillion asset management sector.
Banks are likely to redeem many of their customers’ investments that were previously entrusted to professional asset managers, instead bringing management «in-house» through the new subsidiaries. This could pose an «intense» short-term blow to asset management firms, according to the «Financial Times».
Borading the Investment Universe
The new rules also broaden the investment universe for the new subsidiaries by loosening restrictions on WMP funds entering the stock market, unlisted debt securities and shadow loans. Previously WMP funds could only be directly invested in fixed-income products, and only up to 4 percent of their net assets could be invested in debt securities not listed on the interbank or stock markets.
