China’s asset management industry will continue to expand and lure more players, resulting in a cutthroat competition among the players, said Fitch Ratings.
Fitch said total amount of mutual funds and mandates — not counting mandates held by their subsidiaries — soared 61% at end-2014 to 6.7 trillion yuan ($1.1 trillion) compared to a year ago. Growth will continue because of the country’s huge savings deposits and the domestic industry’s relatively low penetration level vis-a-vis developed markets.
“Fierce competition among asset managers and other participants like banks, securities firms and trust companies may make it more challenging for asset managers to maintain high standards of governance and transparency,” Fitch said in a statement on its website.
Yield-hungry retail investors, accounting for three-fourths of the domestic market, are the main drivers of the industry’s rapid growth. They dominate the equity and balanced funds, Fitch said, while investors in mandates are mostly institutional and are focused on fixed-income instruments.
The government has taken more steps to develop the country’s mutual fund industry. Next month, the mutual fund recognition program with Hong Kong, which will allow funds domiciled in the former British colony to be sold in the mainland, and vice versa, will be implemented.
In the first five months of the year, Chinese mutual funds raised 841.8 billion yuan, more than double compared to the 407 billion yuan recorded for the whole of 2014, according to Z-Ben Advisors, a Shanghai-based fund consultant.
Photo credit: Dennis Jarvis via Flickr