The asset management arm of Shanghai-based Guotai Junan Securities Co. will launch a financial product in early March that may become China’s first hedge fund, the aim of which is to hedge systematic risks on the A-share market through short-selling the country’s stock index futures.
Guotai Junan calls it a “specialized financial product” instead of a “hedge fund.” Due to various restricting factors, including regulatory rules, Chinese securities brokers and fund managers currently have no publicly-released hedge funds despite small-scale experimental trials.
The establishment of Guotai Junan’s “specialized financial product” may open the door for the development of China’s hedge funds and spur the progress of the whole funds industry, experts said.
The hedge fund plans to raise 300 million yuan, or 45 million U.S. dollars, initially, and the company aims to launch identical funds later to raise up to 5 billion yuan, its general manager Zhang Biao said.
Zhang said the company’s quantitative investment team has been operating an account that adopts a “market neutral strategy” and realized 15 percent of annualized return among wide fluctuations of the A-share market.
Last April, China Financial Futures Exchange officially launched the Shanghai Shenzhen 300 Stock Index Futures, making the emergence of hedge funds possible in China. Domestic institutional investors, including Yifangda Funds Management Company, have started hedge funds trials in their proprietary trading and separate account financing businesses.
Zhang noted that the hedge fund would be only a trial of the market neutral strategy and that several products would follow up during 2011.
&$&$By People’s Daily Online&$&$
China’s first hedge fund may debut in March
Thailand enjoys a strategic location and serves as a gateway into the heart of Asia – home to what is today the largest growing economic market.
The country also offers convenient trade with China, India and the countries of the Association of Southeast Asian Nations (ASEAN), and easy access into the Greater Mekong sub-region, where newly emerging markets offer great business potential.
Hub of ASEAN
Thailand was one of the founding members of ASEAN and has been instrumental in the formation and development of the ASEAN Free Trade Area (AFTA).
AFTA entered into force on 1 January 2010 for the six original ASEAN (ASEAN-6) members (Thailand, Singapore, Malaysia, Indonesia, Philippines, and Brunei), thereby reducing import duties to zero; the so-called CLMV countries (Cambodia, Laos, Myanmar and Vietnam) will follow suit in 2015.
Thailand has forged close economic cooperation with other ASEAN member nations, and Thai manufactured products and services have access to their markets, which includes all 10 ASEAN countries. ASEAN is home to more than half a billion people, GDP in excess of US$1.5 trillion and total trade of well more than US$1 trillion per year.
Social and political stability
Thailand is a foreigner friendly and welcoming Buddhist country. The country’s form of government is a constitutional monarchy, with a high reverence for the Thai Monarchy, and devotion to the teachings of Buddhism. And although the vast majority of the people in Thailand are Buddhist, all religions are welcome, and His Majesty the King is the patron of all religions.
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In addition the Exchange will increase foreign listings to not less than 5 percent of total market capitalization. The new structure proposes 2 major groups: (1) The Stock Exchange of Thailand and (2) the Capital Market Development Fund (CMDF). The SET will focus mainly on the capital market functions while the CMDF will deal with long-term capital development through investor education, capital market personnel development and support for SET Research Institute, corporate governance and corporate social responsibility.
The SET has replaced the Automated System for the Stock Exchange of Thailand (ASSET) with the new automated trading system named the Advanced Resilient Matching System (ARMS). This new system, which matches with those used by leading global stock market, can accommodate higher trade volumes and new products and support the planned ASEAN Linkage project. The Financial Sector Master Plan (FSMP) Phase II is expected to be implemented next year. The Financial Sector Master Plan (FSMP) Phase II, which is a five-year plan ranging from 2009-2013, will be implemented in 2009.
This plan aims to reduce operating costs of financial institutions; increase competition among financial institutions and non-bank entities through expanding the business scope permitted banks and greater foreign participation; and improve market architecture with the development of limited deposit insurance and greater variety in risk-management instruments. The new plan allows greater competition in the banking industry. The plan would strengthen the banking system by lowering the NPL ratio to less than 2 percent in 5 years (2013).
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