Financial Services Talking Points | 29/05/2018

In Today’s Talking Points: Demand for Yuan Assets to Increase in Next Two Years; Realty M&A up as Finance Woes Hurt Small Business; Westpac Learning from ANZ’s Mistakes in China; Ant Financial Closes $150 Billion Round of Funding

Demand for Yuan Assets to Increase in Next Two Years 

The Official Monetary and Financial Institutions Forum (OMFIF) has conducted a survey to express the projection of the change in demand for renminbi held assets over the next 24 months. The respondents to the survey were selected from the largest 120 public sector investors, who share a combined $11.6 trillion USD in assets under management. The survey has presented that 18% of respondents expect to increase their renminbi asset holdings, over the next 12 to 24 months. Importantly, none of the respondents said that they would reduce their holdings in renminbi. In addition, the survey also revealed that “the biggest demand for renminbi was from central banks” according to the deputy head of research at OMFIF. This response to the survey comes at a time when China is actively seeking ways to effectively reform their economy and continues to take steps which will allow international investors’ access to renminbi dominated assets, such as stocks and bonds.

Read more on China Daily

Realty M&A up as Finance Woes Hurt Small Business

The Chinese real estate industry is again continuing to consolidate in 2018 and experts within the industry estimate that this pattern of combination will continue until at least 2020. This can be blamed on the continued tightening of finance channels, resulting in tougher regulations. Although some larger companies are able to tolerate this transformation, it leaves smaller entities in a struggle to grow. Thus, larger companies are targeting smaller companies for mergers and acquisitions (M&A) industry insiders say. In 2017, the trade value of real estate M&A totalled 81 billion, which is 30.6% higher based on 2016 figures. Businesses such as Ningbo Fuda Co Ltd and Chongtian Financial have both been forced to halt their participation in the real estate industry. This is the result of restricted access to loans from banks, trusts and insurance companies under new legislation which have made it too difficult for the firms to function effectively. Although small companies are being impacted severely, larger companies are also feeling the wrath. This is illustrated by “36 property companies (releasing) corporate restructuring plans from January to February, with over 56.5 billion yuan involved, up 13 percent year-on-year” according to Wind (Information service provider). The vice president of property developer Future Land, Ouyang Jie summarised the impact on the real estate industry by announcing that the “top twenty real estate companies will command sixty to seventy percent of market share by 2020; the top 50 companies will command an 80 percent market share”.

Read more on China Daily

Westpac Learning from ANZ’s Mistakes in China

Westpac China’s new leadership group met with Chinese officials last week to discuss potential investment opportunities for the bank after China announced a new host of measures to open up their financial services sector in April. Westpac’s head of institutional banking said this week that Westpac would not invest capital into China’s competitive retail banks, avoiding the mistake that their rival, ANZ made. The bank has also said that their strategy for the region has not changed despite the new measures to open up the sector. Westpacs regional GM, Michael Correa stated that the bank is happy with the returns from its current regional strategy, and that the new regulations bring about new opportunities for the bank in sectors such as renewable energy, however traditional businesses such as commodities trading and agriculture are still highly important for the bank and a key aspect of their regional strategy.

Read more on The Australian Financial Review

Ant Financial Closes $150 Billion Round of Funding

Hangzhou Based company Ant Financial has said this week that it has closed its latest round of funding, raising $10 billion at a valuation of $150 billion, putting it in position to surpass Uber as the worlds highest valued private tech company. Ant Financial is the payments affiliate of e-commerce giant Alibaba which has seen massive growth in the past few years, due to the rise of convenient and widespread growth of mobile and e-payment systems in China. This latest round of funding is seen by analysts as the precursor to an initial public offering within the next year. The round was lead by Singapore’s sovereign wealth fund GIC and attracted many high-profile private equity groups. Ant Financial’s Alipay mobile app currently holds 54% of China’s $5.5 trillion mobile payment system, making it the largest group by market share in the sector. The firm is looking to expand it’s operations overseas in the coming year and is hoping that it’s IPO and high valuation will boost business when it makes the jump.

Read more on Forbes