News Brief: Spotlight on Russian-links to Chinese firms – China to relax sales cap for MRF scheme – Fidelity, Neuberger line up bond funds in China
Global fund firms and index providers could face growing pressure to divest from Chinese firms with links to Russia's military. This follows the decision last month by Norway's massive sovereign wealth fund to remove Weichai Power from its portfolio over its joint ventures with Russian and Belarussian vehicle manufacturers.
Experts say that "lighthouse investors" such as Norges Bank IM and greater political scrutiny on China-Russia connections will put a spotlight on global fund firms' investments, which include more than US$1 billion allocated to Weichai Power. Read about their divestment challenges here.
Chinese regulators have proposed lifting the sales cap of the Mainland-Hong Kong MRF scheme from 50% to 80%. The existing cap has long been a deterrent for global firms wanting to participate in the scheme, due to the strict limitations on raising assets in the mainland market.
The proposed move falls short of industry hopes to scrap the cap altogether, though it is still a "very positive move and a long-awaited one", experts say. Read more about other rule relaxations here.
Fidelity, Neuberger Berman and Manulife are rolling out bond index funds in China to boost fundraising. Appetite for such strategies remains strong and they often enjoy faster approval times than active fixed-income products, giving global firms an opportunity to grow their onshore assets more quickly.
"This year is the second year for a lot of global asset managers in China, they are under pressure to boost their AUM to show their headquarters that the China business is promising," an ex-Shanghai-based fund executive from a global asset manager tells Ignites Asia. Read more about global fund firms' product strategies in China here.
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Graph of the week
China's ETF industry has enjoyed "explosive" growth over the past three years. The sector recorded Rmb604.3 billion (US$83.3 billion) of inflows in 2023, representing a near five-fold increase in inflows from Rmb127.2 billion in 2021, according to new research from Morningstar. Read more about the drivers behind the growth here.
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