Financial Services Talking Points | 02-08-2016


In today’s Talking Points: AMP’s China Growth Fund has been wound up due to dissatisfaction of major stakeholder LIM Advisors and other investors at poor performance; unclear data on China’s manufacturing sector reveals difference in weighting of indices; British and Chinese regulators cooperate to pave the road for closer financial services ties; and global equity traders bullish on companies trading in China, including food and mining

AMP China Growth Fund to be Wound Up

An Extraordinary General Meeting of unit holders of Australian Mutual Provident’s China Growth Fund resulted in a vote in favour of the winding up of the fund. The argument that the fund was underperforming was driven in particular by Hong Kong-based hedge fund LIM Advisors, owner of 10 percent of the AMP China Growth Fund shares. With investments in companies listed on the Shanghai and Shenzhen stock exchanges, AMP’s China fund was initiated in 2006 and traded at an average discount of 19 percent of its asset value over its 10 years of existence. Similar funds at HSBC and Morgan Stanley created at roughly the same time as AMP’s China fund have also traded at a discount on average, but not as steep as AMP’s. The shares will be sold off and the net proceeds distributed to investors as Chinese tax and regulatory approvals are received.

Source: Bloomberg

Data on China’s Manufacturing Sector Paints Unclear Picture

The National Bureau of Statistics said Monday that its index for manufacturing had dropped from its break-even point of 50 to reveal a contraction at 49.9. The Caixin China Purchasing Managers’ Index, by contrast, was upgraded to 50.6, attaining its first break-even level of 50 in 17 months, from 48.6 in June. These readings go contrary to the perceived phenomenon that statistics released by the government are likely to paint a more optimistic picture of the economy. The government’s index focuses on larger state-owned companies and the private index run by Caixin and research group HIS Markit focuses on smaller private companies.

Source: WSJ

British and Chinese Financial Agencies Cooperate to Create Regulatory Framework

Britain’s Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC) are discussing an agreement to streamline financial services projects between the two countries. In last September’s EFD meeting in Beijing, the UK’s then Chancellor George Osborne and Chinese Vice-Premier Ma Kai said that they were considering the creation of a London-Shanghai equity link and mutual funds recognition scheme. The Brexit vote has since created uncertainty about London’s status as a global hub for finance, but the recent talks between the two countries’ agencies indicate that both parties are interested in continuing with previous plans.

Source: Reuters

Global equity traders bullish on China facing companies

An index tracking companies from developed markets reliant on revenue from China has risen 33 percent since February. The index slumped by 35 percent over the 12 months prior to February’s low, but signs China’s economy is stabilising has encouraged the world’s equity traders to return. The index tracks companies such as Qualcomm Inc., Yum! Brands Inc. and mining giants Rio Tinto Group and BHP Billiton Ltd., who generate a large share of their revenue from China. Bloomberg speculates the return to companies leveraged to China has been amplified by growing fears over the efficacy of central bank stimulus in Europe and Japan and the Brexit fallout.

Source: Bloomberg