Taiwanese fund house Fubon Asset Management is busily pushing into the mainland China market after officially launching a mutual-fund joint-venture in Beijing last week.
Founder Fubon Fund Management was set up on July 25, with the asset management business of parent Fubon Financial having inked the JV deal with the securities arm of Founder Group back in March last year, as reported by AsianInvestor.
Fubon has invested Rmb66 million ($10.4 million) to take a 33.3% stake in the venture and will consider raising that stake to 49%, the maximum level allowed, if the venture goes well.
The Fubon JV is looking to raise Rmb3 billion ($466 million) in domestic funds and then hopes to branch out into offshore investments as a qualified domestic institutional investor (QDII).
“Chinese investors are sick and tired of the slow movement of the A-share market,” Thomas Tsao Yu-fei, the chairman and CEO of Fubon Asset Management, tells AsianInvestor. “After we reach the minimum requirements, we plan to launch QDII products.”
Despite the poor performance of many of the early QDII funds launched at the market peak in 2006/2007, Fubon believes there is now strong demand from mainland investors to put their money to work overseas after the underperformance of Chinese stocks in the last two years.
Fubon, Taiwan’s second-largest finance company, is also setting up a life-insurance venture with Nanjing Zijin Investment Co and already has a bank joint-venture in China.
The Taipei-based firm says it is going to be funnelling more Taiwanese investment into mainland stocks.
It plans to use all of its $100 million qualified foreign institutional investor (QFII) quota to set up a single exchange-traded fund (ETF) listed in Taipei for Taiwanese investors to play Shanghai’s A-share market. The company has already filed with Taiwanese regulators to register the new product, and hopes to launch it immediately if it wins approval as expected this month.
The product, the Fubon Shanghai Stock Exchange 180 ETF, will track the performance of the 180 largest stocks listed in Shanghai’s A-share market. Together with cash positions, the company estimates that the fund can raise total assets of NT$3 billion ($104 million).
With Taiwanese investors already remitting large flows of money through Hong Kong to play Chinese stocks, demand for one of the few direct plays into A-shares on the Taiwan Stock Exchange should be strong.
“We don’t need to promote this – I think local investors have a pretty good knowledge of A-shares,” said Tsao. “And A-shares are at a very low point. There will be huge demand and we don’t have enough quota to satisfy everybody.”
Fubon’s competitor Polaris already has an ETF focused on mainland stocks, the W.I.S.E. Polaris CSI 300 Investment Trust Fund, which according to BlackRock has $546 million in assets. But it feeds into China via Hong Kong.
Fubon aims to have a low expense ratio of 33.5 basis points per year, slightly below the 40bp on the Polaris product. “We are probably the purest access, tracking directly without any additional charge,” added Tsao.
Fubon also aims to list the Fubon Taiwan Technology ETF in both China and Hong Kong, where the company believes there will be strong demand for Taiwan’s chipmakers.
“I would love to extend my Taiwan tech ETF into China,” Tsao said. “If we concentrate on tech, and have that listed on the Shanghai stock exchange, I think it is going to be hot.”