The newly appointed chairman of Taiwan’s largest asset manager is setting out to expand its international footprint into China and Southeast Asia in the next three years.
Jeff Chang, who was promoted to chairman of Cathay Securities Investment Trust this March, says a January ruling by the China Securities Regulatory Commission to expand the renminbi qualified foreign institutional investor (RQFII) programme to Taiwan will create excellent opportunities for Taiwanese fund managers to invest in China. No timeline for its introduction has been given.
While this RQFII programme is still pending, it’s a welcome development for Taiwan's asset management industry, which has been all but dormant for five years, Chang says.
“In the past few years, the onshore Taiwanese market has stalled. So the RMB business and RQFII quotas are key areas for Taiwanese fund houses to grow their business,” Chang tells AsianInvestor.
January’s ruling sets out the prospect that Taiwanese fund houses will be allowed to invest in the mainland using renminbi for the first time. It has given Cathay Securities Investment Trust, which manages NT$380 billion ($13 billion) in AUM, the incentive to focus on its RMB business this year.
Cathay formed a joint venture with China Development Bank Securities Company a year ago, which was approved by the CSRC in April, giving Cathay a local presence, Chang says. Cathay holds 33.3% and CDB Securities 66.7% of the Beijing-based JV, set to start in the first half this year.
Allowing Taiwanese fund houses to invest directly into Greater China will increase its appeal with foreign investors, he adds. "When we approach European and American investors, they might not be interested in Taiwanese equities. However, they will be interested if we have a Greater China portfolio,” says Chang. “Therefore, we want to build up our track record in the China market, which will help us to enter foreign markets.”
Eventually, Cathay will consider how best to enter the Southeast Asian market, with Chang noting that the firm will likely seek a JV partner, although he says it is still too early to offer details.
Opening an office in Luxembourg to approach overseas investors is also a possibility, although cost is a concern, he adds.
Separately, in February Cathay applied for an additional qualified foreign institutional investor (QFII) quota of $310 million. At present, Cathay has $100 million in QFII quota, all invested in equities.
Once the application goes through, which Chang expects to happen next month, its quota will increase to $410 million, at which point Cathay Securities will launch three multi-currency umbrella funds denominated in both RMB and NT dollars. It plans to deploy $110 million of the new quota to equities and $200 million to bond funds.
Cathay Securities Investment Trust manages NT$210 billion for insurer and sister company Cathay Life. Cathay Securities, Cathay Life and Cathay United Bank all fall under Cathay Financial Holdings.