China urges fund JVs to give health of foreign partners
SHANGHAI (Reuters) - China's securities watchdog has urged fund ventures partly owned by foreign financial institutions to disclose the financial state of their partners, reflecting increasing government concern about the spreading impact of the global financial crisis.
Joint venture fund companies need to report this month how their overseas shareholders have been affected by the escalating crisis, and how that might affect the ventures' operations, according to an e-mailed request by the China Securities Regulatory Commission (CSRC).
"The concern is that some troubled foreign shareholders such as AIG might eventually pull out of their ventures, thus, affecting management stability," said Liang Jing, analyst at Shenyin & Wanguo Securities Co. "The overseas crisis could also hurt some investors' confidence in JV funds."
In an e-mail the CSRC sent to the fund ventures and seen by Reuters, the commission said:
"Recently, the international capital markets are hugely affected by the subprime crisis. In order to understand foreign shareholders' situations, and strengthen supervision, JV fund companies please obtain information and pay close attention to the operational status of foreign shareholders.
"Please submit after the national holiday a report in the form of an email on how your foreign partners are affected by the financial crisis and how that could affect the joint venture fund company."
A CSRC spokeswoman declined to comment.
CSRC is joining other regulatory bodies in containing risks stemming from the financial turmoil that has embroiled Western institutions such as Fortis (FOR.BR), American International Group (AIG.N) and Societe Generale (SOGN.PA). The three firms all own Chinese fund ventures.
China's banking watchdog has toughened guidance on banks' capital adequacy requirements, while the country's insurance regulator has also stepped up monitoring insurers' repayment abilities.
The CSRC move came after Hua An Fund Management Co said last month that the operation of its overseas investment fund was seriously affected by the collapse of Hua An's business partner, Lehman Brothers Holdings Inc LEHPMQ.PK.
There has also been some concern over the health of Shanghai-based AIG-Huatai Fund Management Co, after foreign shareholder AIG was thrown a lifeline federal loan on September 16 and announced plans to sell side businesses to pay off debts.
Troubled financial group Fortis (FOR.BR)(FOR.AS) also owns a fund venture in China, Fortis Haitong Investment Management Co.
(Editing by Ken Wills)
