What Global Areas China's New Investment Fund Might Be Looking At (Teh-Hsiu Fu)

8/7/2019 What Global Areas China's New Investment Fund Might Be Looking At (Teh-Hsiu Fu)

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Presentation forPresentation for

National Press FoundationNational Press Foundation

TehTeh--Hsiu FuHsiu Fu

CEOCEO

Everbright Pramerica Fund Management CompanyEverbright Pramerica Fund Management Company

Shanghai ChinaShanghai China

June 8, 2007June 8, 2007


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Established in April 2004;

A joint venture between Everbright Securities Company, Ltd., a

subsidiary of China Everbright Group and the investmentmanagement business of Prudential Financial, Inc. ;

Everbright Pramerica has a registered capital of RMB 160 million

with 67% by Everbright Securities and 33% by Pramerica.

Current staff number at 59.

Introduction of Everbright Pramerica


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As of June 2007, the company manages four investment funds inChina, i.e., Quantitative Core Equity Fund, Dividend Equity Fund,

New Growth Equity Fund and Money Market Fund;

The fund assets were invested in the Chinese equity and bondmarkets;

Denominated in RMB, the funds were distributed primarily by banks

and brokerage firms to Chinese investors;

The total AuM of the four funds were RMB 6.63 billion as of May 31,

2007.

EPF Fund Family


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Market Background

EconomyEconomy

The Chinese economy grew at a rate of around 10% in the last few

years, mostly driven by infrastructure investment and domestic

consumption needs;

Real EstateReal Estate

The government launched several austerity measures in 2005-

2006 to curb the overheating real estate market especially in

Beijing and Shanghai;

Currency

Currency

The government adopted a more flexible foreign exchange

mechanism in July 2005 which prompted the RMB to appreciate

from the previous level of 8.27 to the current level of 7.65 to 1 US$.


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Recent Market Development

The most significant transformation of the Chinese stock market

was the reform program of state-owned shares which began in

mid 2005;

Record number of retail investors flocked to open security

trading accounts, providing fresh capital which lifted the Chinese

equity market to record high;

Fear of market bubble led many institutional investors to reduce

equity exposure in recent weeks.


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QFII Update

The Chinese government introduced the QFII (Qualified Foreign

Institutional Investors) program in 2003 in order to allow foreign

capital to invest in the Chinese market in an orderly and controlled

manner;

So far, there were 52 approved foreign institutions to use the QFIIquota to invest in China with an approved amount of USD 10

billion;

The government recently indicated that the total QFII quota will be

increased to USD 30 billion.


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QDII Update

QDII (Qualified Domestic Institutional Investors) program was

launched by selected banks, insurance companies and fund

management companies with government approval;

The program allows Chinese investors to invest in offshore

markets, with Hong Kong as the current focus; Investor interest to invest in US or other international markets is

modest at this stage due to the hot local equity market and the

concern about the appreciating RMB;

Overtime, we expect that Chinese investors will be moreinterested in QDII products as experience in Hong Kong and

Taiwan will demonstrate.


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The Investment Grid

Local funds

Local bank products

Local insurance products

Local brokerage products

QDII approval needed

(RMB to foreigncurrencies)

QFII approval needed

(Foreigncurrenciesto RMB)

Open

Chinese

Investors

International

Investors

Chinese

Market

International

Market


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Fund Market Overview

Chinas fund Industry has been developed since 1997, and the firstopen-end fund was launched in 2001;

Number of fund companies in existence: 58;

There are 34 local companies and 24 joint venture companies, of

which 4 are linked with domestic big banks;

Foreign partners of the fund companies include: Prudential (US), ING,

J.P.Morgan, Fortis, Invesco, Allianz, Paribas, Prudential (UK), UBS,

Principal, Franklin Templeton, BMO, CSFB, SG, Deutsche, ABN

AMRO, AIG, Merrill Lynch, Schroders, HSBC, etc.


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As of March 31, 2007, there were 332 funds in the Chinese

fund industry, with total assets under management of RMB

1,175 billion;

Total AuM of 41 close-end funds were RMB 185 billion,

accounting for 16% of total AuM;

Total AuM of 291 open-end funds were RMB 990 billion,

accounting for 84% of total AuM.



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No.ofFunds

Total assetsunder

management

(RMB billion)

Dec 2005 Dec 2006 Mar2007 Dec 2005 Dec 2006 Mar2007

Close-end

Funds54 53 41 82 1622 185

Open-end

Funds169 268 291 394 694 990

Total 223 321 332 476 856 1175


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Fund AuM 2002-March 2007

150

239

469

856

1175

325

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 M r.2007

RM on

476


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Open-end Fund Asset Breakdown

Asof

March 2007

Equity

Funds

Guarantee

Funds

Hybrid

Funds

Bonds

Funds

Money

Market

Funds

Total

Size

(RMB billion)582 13 269 37 89 990

Fund

Assets(RMB billion)

59

1

27

9


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Discussion Points

What global areas might Chinas new

investment fund be looking at?

RegionsRegions SectorsSectors

US

Europe

Japan

Emerging Markets

Equities

Bonds

Money Market

Real Estate

Commodities

Hedge Funds


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Everbright Pramerica Fund Management Co.

Address: 46/F Bund Center, No. 222 Yan An Road (E),Shanghai, China

Postcode: 200002

Tel: (86) 21 3307 4700

Fax: (86) 21 6335 1152

Websitewww.epf.com.cn

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What Global Areas China's New Investment Fund Might Be Looking At (Teh-Hsiu Fu)