AsianInvestor's regulatory roundup, July 23

China eyes looser JV rules, to reform SOEs; Taiwan to raise quota for China institutions; insurance relaxation seen as property boon; and Luxembourg clarifies Ucits rules.
AsianInvestor's regulatory roundup, July 23

China: Regulator mulls looser JV rules
The China Securities Regulatory Commission (CSRC) has hinted it may further relax rules on foreign fund houses operating in China.

In a document published on June 13 but picked up by the media last week, the regulator said it would relax foreign ownership limitation rules “at the ideal time”.

However, the report, Opinion on promoting the innovation and development of the asset management industry, did not give any more details on a possible timetable or how the rules would be relaxed.

The CSRC also said it would “push for the development of the recognition of mutual funds scheme in a similar way to [the pending programme with] Hong Kong”. This suggests other overseas markets may be invited to join a cross-border programme with China.

China: Pilot SOE reforms floated
China’s government is looking to encourage more private investment in state-owned enterprises (SOEs), in some cases reducing its holdings in the dominant, but often inefficient enterprises.

Last week on its Weibo blog, China’s State-owned Assets Supervision and Administration Commission of the State Council singled out six companies as potential test cases, including healthcare giant Sinopharm and conglomerate China National Building Materials, which already have listed subsidiaries.

China’s Communist Party hopes further SOE privatisation will increase efficiency, reduce leveraging and boost economic growth. Shares in private-sector companies have outperformed those of state-controlled firms by 325bp since 2009, according to an HSBC report.

China is also considering other SOE reforms. The State Development and Investment Corporation and China National Cereals, Oils and Foodstuffs Corporation will be reorganised, Sasac said, into state-owned asset management companies, thereby changing the government’s role from a regulator/manager to a stakeholder.

State media said the move is expected by some observers to reduce political interference in the companies’ operations.

Taiwan: Regulator considers China quota increase
Taiwan is considering increasing the total amount that Chinese investors can invest into Taiwan, reports the country's Economic Daily, quoting a regulator.

Under the current regulation set by Taiwan’s Financial Supervisory Commission (FSC), Chinese investors can buy up to $500 million in total of Taiwanese securities via the qualified domestic institutional investor (QDII) programme.

It remains unclear how large the new limit would be. The FSC will seek opinions on the matter, including from the central bank and Mainland Affairs Council, the official was quoted as saying.

Asia: Insurance deregulation seen as a real estate boon
Deregulation of Asia’s insurance industry could lead to a real estate boom in the near term, with London and New York set to benefit most, according to a recent report by property services firm CBRE.

The report suggests that an additional $75 billion could be pumped into the sector by 2018 as a result of Asian insurers’ greater freedom to invest in overseas property.

Regulators in the region have generally until recently allowed insurers only to invest in liquid assets such as equities and fixed income.

As of 2013, Asia's insurance industry had invested $130 billion into real estate. CBRE expects that investment to reach $205 billion by 2018.

Chinese, South Korean and Taiwanese insurers are already starting to benefit from greater flexibility to invest directly into real estate, especially overseas.

A divergence of investment styles is anticipated, with Chinese and Taiwanese insurance companies generally expected to take direct control of their overseas real estate. South Korean insurers, however, are seen engaging in more indirect ownership, such as through funds.

By 2013, direct and indirect property investments made up on average just 2% of Asian insurers’ portfolios. That figure is 1% for China and 2.4% for South Korea. Developed market insurers typically allocate 4% to 6% of their assets to real estate.

Luxembourg: Ucits depositories regime clarified
Luxembourg’s financial regulator has published a circular that seeks to clarify rules for Ucits funds and their depositories.

The document from the Commission for the Supervision of the Financial Sector’s sets out rules relating to the segregation of Luxembourg-domiciled Ucits funds.

This is a departure from the previous principles-based stance, with the publication defining the roles, duties, obligations and functions of a Ucits depository.

The rules cover the separation of conflicting functions, which is an example of the regulator’s new prescriptive approach, according to Luxembourg law firm Arendt & Medernach.

Other regulation-related stories published on recently:

Chinese managers in no rush to open in London

Singapore plans changes to product rules

China’s first PE-mutual fund house targets launch

HK urged to introduce open-ended fund structure

Can Hong Kong deliver on regulatory promises?

Stock Connect sparks worries over rat trading

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