Hong Kong-based Value Partners Group remains upbeat on the future development of the Chinese market in what its executive describes as “the dream opportunity” for the asset management industry, despite political and economic uncertainties that the country is facing.
“This is emerging as the world’s biggest opportunity in a generation for the asset management industry, [with] a huge pool of savings waiting to be managed and growing double-digit figures per year,” said Cheah Cheng Hye, co-chairman and co-chief investment officer of Value Partners Group, during the Bloomberg Invest Global virtual event.
The Malaysia-born investment veteran was referring to Beijing’s measures earlier this year to further open up the domestic financial sector, allowing full foreign ownership of futures and fund management firms, as well as other financial services companies.
“China is the dream opportunity,” said Cheah, adding that the company is “moving full-steam ahead,” raising capital and preparing products in an attempt to become one of the overseas players to be able to get full access to the mainland market in the “fairly near” future.
Founded in 1993 and went public in 2007 as the first asset management firm listed in Hong Kong, Value Partners Group focuses on value investing in Greater China and Asia with $11.3 billion in assets under management (AUM) as of April 30, 2020, according to its website. The company set up its first mainland office in Shanghai in 2011.
Cheah said that some of Value Partners Group’s funds that primarily bet on China’s A-shares have recorded gains of more than 10 per cent so far this year.
Cheah’s confidence in the Chinese market comes after the country just narrowly overcame the spread of the coronavirus pandemic and Beijing quickly bolstered measures to curb its re-emergence in the capital city earlier this month.
Although China’s economy showcased what he referred to as “a V-shape recovery” from the pandemic, the country’s prolonged trade tensions with the United States and rising political uncertainties in Hong Kong have stoked concerns and doubts over future investment opportunities in the Greater China region.
The Hang Seng Index, Hong Kong’s stock benchmark, dropped over 1,300 points on May 28 in response to Beijing’s approval of the tailor-made national security law – marking its biggest single-day slump since 2015 before picking up to pre-legislation sell-off levels in the first week of June.
“The Hong Kong stock market continues to go up… The market is looking past the legislation,” said Cheah. “The market seems to feel that the legislation has advantages and disadvantages. But basically, it allows Hong Kong to leave behind a very contentious issue.”
The Asian financial hub, which is constantly roiled by anti-government protests, has seen some locally operating risk-averse financial firms consider a Plan B to reallocate their assets and resources to another region in the wake of Beijing’s grasping control. Among these alternative options is Singapore, which is more likely to woo businesses with similar tax rates, lower rents and safe streets.
Statistics from the Monetary Authority of Singapore (MAS) indicate that the country’s foreign currency deposits jumped almost fourfold from one year before to $27 billion in April 2020, while deposits from non-residents increased 44 per cent to $62 billion, although the authority stressed that the amounts – the highest since 1991 – had come from a wide range of sources and were not dominantly from a single region or country.
Cheah also maintains a positive attitude that the trade disputes between China and the US will soon come to an end after the American presidential election this November, although he acknowledged that the current tension between the two parties is “the worst” in decades.
Up till now, the US-China trade negotiations have lasted more than two years, piling up tariffs on $379 billion of Chinese products and imposing downside pressures on financial markets in both countries and worldwide before the pandemic triggered an even further recession.
Decoupling between the world’s two largest economies, which together contribute to around half of the global carbon emission and spending on the military, will make it “practically impossible” to find solutions to global issues, he said.
“I think the world has become very fixated on the idea that the two of them are decoupling, but the figures don’t show that. I put a lot of effort into trying to find out what the reality [is] behind the headlines. I think – in summary – politicians do politics, but businessmen follow the money.”