Newly Published Reports

Solving market instability and increasing investor participation, especially among long-term investors, is at the top of many policy makers’ priority list. Cross-border programs are being leveraged to help meet these goals, with the RQFII program on track to release more quota and issue licenses to HK born-and-bred firms, while the QDII scheme is making dramatic changes to its investment scope. Mutual Recognition, meanwhile, becomes more of a possibility with each of these developments opening up cross-border flows.

Mutual recognition has been the talk of the town for the past several months. The program, which Z-Ben Advisors expects to be launched prior to the end of 2013, is meant to enable Chinese firms currently in Hong Kong to sell their products to global buyers. Likewise, foreign firms are projected to be able to raise funds directly from the Chinese market. In our view, mutual recognition will not be exactly mutual at first, with different speeds of implementation expected between the two groups.

After receiving feedback on the first three editions of our Greater China Funds Series, Z-Ben Advisors has amended our methodology to include a much wider range of products. This new sample, we believe, gives a more comprehensive overview of the Greater China segment, given the information available in the public domain. For the funds themselves, there was a mixed bag of good and not-so-good news last month.

The optimism that many investors and firms started off 2013 with appears to be gone and December’s 17% growth in the CSI 300 Index seems like a lifetime ago. Several regulatory initiatives – and fears for more rocking of the boat – hammered financial and real estate stocks in March. The fund industry, however, performed relatively well despite the market’s poor display. Considering the CSI 300’s 6.67% drop in March, organic outflows were relatively small, totally only RMB2bn.

Greater China funds were once again slaves to equity-market performance in February. Yet unlike for the previous month, this resulted in a less-than-favorable outcome for investors. Given the dominance of active-equity funds’ (and increasingly ETFs’) contribution to total Greater China AUM, the declines in performance of the CSI 300 and Hang Seng last month caused fund flows to tumble. However, near-term disappointments should not detract from long-term promise.