Amundi Says China Property Crackdown Will Boost Demand for Funds
(Bloomberg) -- China’s crackdown on the property sector, which has sparked defaults at China Evergrande Group and others, should provide a lift to stocks and bonds as investors shift away from real estate, a top executive at Amundi SA said.
“We are going to see money flowing from real estate investments to capital markets investments,” said Xiaofeng Zhong, chairman of Amundi’s business in the Greater China area. “The government is encouraging funds flowing into the financial market.”
The debt crisis at Evergrande has roiled China’s real estate sector, sending new home prices lower in September and October. That’s reducing demand for condos and other properties, which account for about 75% of household wealth in China.
Beijing’s mantra that housing is for living in and not speculation -- reiterated by Communist Party officials last week -- will drive more people to public markets, Zhong said. The mutual fund industry is also growing as China’s gross domestic product per capita surpasses $10,000, a key metric for wealth accumulation, he said.
Still, China’s stock market is under pressure as the world’s second-largest economy slows, thanks in part to the property slump. The Shanghai Shenzhen CSI 300 Index has slipped 2.5% this year.
The Paris-based fund giant is planning to more than double assets under management in China, Hong Kong and Taiwan by 2025, from its current level of about $120 billion. Amundi wants to bolster its China footprint by offering more products, hiring staff and working closely with its joint venture partners Agricultural Bank of China Ltd. and Bank of China Ltd.
Amundi is taking a similar approach as BlackRock Inc. and Goldman Sachs Group Inc. in exploring multiple tracks to break into China’s retail wealth management space, which Deloitte estimates could grow to $3.4 trillion by 2023.
In addition to its partnerships with the Chinese banks, the firm is “open” to setting up a stand-alone fund business, as BlackRock has done. New York-based BlackRock raised 6.7 billion yuan ($1 billion) for its first China mutual fund in September.
“Our first priority is to get things done right with our two JVs,” Zhong said in an interview from Hong Kong. “But we are open” to that option.
Demand is also growing in the region for funds linked to high environmental, social and governance standards, with attitudes around ESG changing noticeably, Zhong said.
“We see growing appetite for these kinds of funds, especially in China,” he said.
©2021 Bloomberg L.P.