China: Transition has just begun – Standard Chartered

Standard Chartered analysts point out that the China’s asset management industry suffered a contraction last year due to the introduction of stringent guidelines.

Key Quotes

“Total assets under management (AUM) of wealth management products (WMPs) sold by banks, trusts, funds, brokerages, futures and insurance companies fell for the first time in 2018, to CNY 121.6tn at year-end from CNY 124.0tn at end-2017; but fine-tuning of the policy tone in mid-2018 led to a mild recovery in H2-2018.”

“We expect China’s asset management industry to recover in 2019. Financial conditions have eased in recent months, mitigating the growth downturn. The authorities have become more receptive to the role of shadow banking in supporting the real economy. While there is no directional change in the regulation of the asset management industry, the grace period to exit non-compliant products will likely be extended. The share of NAV products is likely to rise over time.”

“We expect banks to set up wealth management subsidiaries to ring-fence the business from the parent bank. For non-banks, trust companies and securities firms were hit hard by the new guidelines, while public and private funds continued to grow.”