China Has Become A Hot Spot For Global Investment. How Should Domestic Asset Management Institutions Respond?

"The impact of the new crown epidemic aggravates the global situation of" asset shortage ". International long-term investment institutions will choose to increase their holdings of" Chinese assets "whether from the perspective of decentralized investment or from the perspective of acquiring alpha. This coincides with China's desire to promote China's financial development through opening up its financial markets and its economic transformation to innovation driven. The two complement each other to enhance the attractiveness of "Chinese assets". It should be said that the performance of China's stock and bond markets in 2020 fully reflects the value of "Chinese assets." Xie Yaxuan, managing director of China Merchants Securities, pointed out.

On November 28, the "Southern finance and Economics International Forum 2020 annual meeting" was held in Guangzhou Poly Intercontinental Hotel, jointly sponsored by the headquarters of Guangdong, Hong Kong and Macao big bay area of China Central Radio and television, and hosted by the 21st century economic report. At the parallel sub forum of "institutional investors - selection and award ceremony of 21st century gold medal analysts in 2020", professionals from financial subsidiaries and securities companies expressed their opinions on the future of China's asset management.

Asset value highlights in China

Xie Yaxuan, managing director of China Merchants Securities, believes that China, as a representative of emerging economies, is the preferred investment destination. Looking forward to the future, the global economy is expected to gradually come out of the trough, China's economy is expected to bid farewell to the state of the next step, the global systemic risk will decline, and the situation that the value of China's stock and bond assets is undervalued is expected to be changed. The US dollar has entered a weak cycle, and the RMB exchange rate has appreciated towards 6.0, which helps financial stocks and other large blue chip plates to repair their low valuations; commodity prices have rebounded, and the economic growth prospects of emerging economies are becoming clearer; China's assets will be improved through multi-dimensional cooperation such as the "belt and road" and RMB internationalization; international trade financing and international economic and trade activities are re activated China's economy as the world's factory and China's listed companies have benefited significantly; the recovery and prosperity of the global financial cycle have led to the flow of international capital, especially international capital under securities, to emerging economies. China, as the representative of emerging economies, is the preferred destination.

Xie Yaxuan's judgment on the future trend of major global assets is as follows:

First, the exchange rates of non-U.S. currencies, including the euro and Japanese yen, as well as commodity currencies such as Australian dollar and Canadian dollar, should be bullied. Since 2012, the correlation coefficient between the spot exchange rate of RMB against the US dollar and the US dollar index is as high as 0.8. The US dollar is weak and the RMB is strong. We expect that the RMB / US dollar exchange rate will return to the level of about 6.0 in 2021.

Second, look at commodities, especially new energy and new materials related to the new economy. The recent repair of CRB spot index is only the beginning.

Third, be bullish on gold. Since the 1970s, the high point of the US dollar index has fallen gradually, and the US dollar price of gold has risen step by step. Therefore, the high point of this round of gold price should be significantly higher than that of the previous round of 2000 USD / oz.

Fourth, bear the bond price, especially the bond price of non-U.S. The main starting point is that the recovery of global economic growth rate and the rise of price level lead to the rise of nominal interest rate and the negative effect of bond price.

Fifth, look at equity assets of emerging economies. In the past, MSCI Emerging market stock index outperformed MSCI developed country index in the process of falling dollar index. China accounts for more than 30% of the MSCI Emerging market stock index, so it should perform well in particular.

Fill the gap of asset management

At the same time, domestic asset management institutions are also facing external competition pressure.

Gu Weiping, President of xingyin financial management, pointed out in his keynote speech that there are some new changes in China's asset management market, which are mainly manifested in the following four aspects:

First, new changes at the policy level have been made to continuously promote the structural reform of the financial supply side. With the development of direct financing and equity financing, asset management has become an important part of the financial system and will play an increasingly important role in the social financing system;

Second, investment preference presents new changes, and customers begin to try to diversify asset structure. However, the long-term investment risk of investors is not equal to the long-term investment of the trust products;

Third, new changes in asset allocation behavior. The traditional asset allocation of bank financial management is mainly inter-bank deposits and other money market tools, as well as bonds and non-standard. In the past, equity investment was more about real debt, structured financing and stock pledge than real equity investment. At present, it is a cross market and cross variety asset allocation, covering the whole spectrum of target investment such as innovation, fixed increase, high dividend, high quality growth value, and fof / mom. From a single asset model to asset rotation to obtain long-term stable returns;

Fourth, new changes in the pattern of industry competition. Financial management subsidiary has become a new participant in the capital market. At present, 21 companies have been approved and 19 have been opened. At the same time, with the acceleration of financial opening up, overseas asset management giants have entered the Chinese market and set up wholly-owned or joint-venture asset management companies or financial management companies. For example, Huihua financial management has opened its business in Shanghai. The competition pattern between Chinese and foreign institutions is forming, and the entry of foreign institutions will also profoundly change the ecology of China's asset management industry. For example, in value investment, there are more mature overseas algorithmic trading, ESG investment, passive investment, index customization and high-frequency trading, which is different from judging value through valuation in books.

"Compared with the asset management products of China and the United States, we obviously feel that there are great defects in China's asset management products. Either the fixed income products of bank financing or the equity products of public funds, products with balanced risk and income in the middle zone are relatively scarce. How to achieve multiple strategies, styles and products is particularly worth studying in a low interest rate environment. " Gu Weiping said.

Fu Qiang, deputy general manager of Ping An financial management, mentioned in his speech that the core positioning of bank financial management in the future is the provider of solutions, so we should take a differentiated route. In recent years, China's risk-free rate of return has generally declined, and the future probability rate will be in the era of low interest rates. At the same time, China's equity market is characterized by high yield, high volatility and low sharp. Such market background determines that the major direction for future customers to obtain desirable returns must be based on multi asset solutions. From other dimensions, there are six major competitors in China's big asset market. Differentiation is the need of competition, customers and channels. From the perspective of feasibility, bank financial management, due to its license plate and business scope attributes, has rich and diversified asset tools, and is relatively closer to channels and customers, so it has the prerequisite for production solutions.

"The forms of solutions include absolute return, structural benefit, life cycle, target risk, education goal, pension goal, global allocation, etc. From overseas experience, the solution is one of the fastest growing areas in the global asset management market. The assets under management of multi asset businesses in the largest 26 markets have exceeded $9.6 trillion, which is one of the most important development trends of the global asset management industry. " Fu Qiang said.