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February 09, 2012 at 09:32 AM
The potential of China’s vast markets has long caught investors’ imaginations, but in the case of asset management at least, market progress has not kept pace with the Asian giant’s rapid economic growth. But the approval by Chinese regulators of the country’s first ETF linked to Hong Kong’s Hang Seng China Enterprise Index represents a cautious opening for China’s tightly controlled capital markets.
The China Securities Regulatory Commission this week authorized Guangzhou-based E Fund Management to market the Hong Kong ETF to Chinese mainland investors. China maintains tight control over financial markets, severely limiting the extent to which capital can enter or exit the country. Hong Kong, though under Chinese sovereignty, is considered offshore for purposes of Chinese investing.
According to a new report by Cerulli Associates, which monitors global asset management developments, overseas investments by Chinese mutual fund managers amount to just $11 billion–a mere 3.2% of total assets under management as of June 2011. And that international diversification is not all that foreign. Cerulli, in the Asia-Pacific edition of its Cerulli Edge first quarter 2012 report, says that sliver of offshore investing is mostly invested in Hong Kong (58%), with the next largest segment of investments allocated to other Asian markets (18.7%).
