(Removes reference to private equity in headline, clarifies
that rule applies to a specific type of private-placement
investment funds, not private equity funds)
SHANGHAI Dec 31 China plans to allow eligible
securities houses and insurers' asset management units to
develop and manage mutual funds in a bid to reinvigorate an
industry struggling to produce returns for investors.
It will also allow Chinese private "sunshine" funds, which
invest privately raised capital in listed securities, to launch
mutual funds and market them to the public.
The move will open an already-crowded sector to more
competition. The Chinese mutual fund industry already has more
than 60 companies vying for a pool of investors who have grown
steadily disenchanted with Chinese equity markets.
Shares of Chinese insurers and brokerages moved higher on
Monday, with China Life Insurance, the country's
largest insurer, jumping 3.8 percent in Shanghai to its highest
intra-day level since April 2011 at 0205 GMT.
Both the Shanghai Composite Index and the CSI300 of
the top Shanghai and Shenzhen listings were up 0.7 percent.
China Life Insurance's Hong Kong listing was up more
than 1 percent, outperforming the benchmark Hang Seng Index's
0.1 percent rise.
Shares of Haitong Securities , China's
second-largest listed brokerage, rose 1.4 percent in Hong Kong
and 0.8 percent in Shanghai.
Mainland stock markets have historically failed to produce
positive returns for most retail investors, according to recent
survey data from the Southwest University of Finance and
Economics in Chengdu.
At the same time investors are now able to invest in
exchange-traded funds (ETFs) that passively track indices,
diminishing the need for active management.
Some mutual funds have recently begun moving money into
China's rapidly developing bond and money markets, which have
proven more popular with many investors given their greater
stability. However, such funds produce far smaller management
fees for fund managers.
Regulations published on the China Securities Regulatory
Commission's (CSRC) website on Sunday set distinct barriers for
the new entrants.
Securities houses must be profitable, with at least 20
billion yuan ($3.21 billion) in assets under management (AUM)
and at least 1 billion yuan in net assets in the most recent
Insurers' asset management units must also have 20 billion
yuan in AUM and be in compliance with other regulatory
requirements specific to the insurance industry.
The "sunshine" funds need to have at least 100 billion yuan
in paid-in capital with at least 300 million yuan AUM over the
last three years, according to the regulations.
All firms must have at least a B rating from the CSRC for
regulatory compliance and risk management.
The official China Securities Journal reported on Monday
that there are 16 securities houses and 14 insurance companies
that currently meet the conditions for participation.
($1 = 6.2335 Chinese yuan)
(Reporting by Pete Sweeney and Chen Yixin; Additional reporting
by Clement Tan in HONG KONG; Editing by Richard Borsuk)