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China's Open-End Fund Helps Liberalizing Domestic Savings: Interview
The launch of open-end fund in China is a very important step in meeting the objective of liberalizing domestic savings and diversifying the way of investment, said a fund manager in Hong Kong.
It also allows individuals to participate the economic growth indirectly and helps develop the capital markets that need more element of long-term saving and investment, said Mark Konyn, director of Dresdner RCM Global Investors Asia Ltd.
In a recent interview with Xinhua, Konyn said Chinese investors tend to be short term in dealing the domestic A share market, but the fund industry could hopefully develop into a major component as part of the structure of the capital markets.
Dresdner RCM, a subsidiary of Germany-based Dresdner Bank Group, has over 70 billion U.S. dollars in assets under management and advice. Its Asian branch, which dated back to 1984 in Hong Kong, has become an active participants in the Asian market including Hong Kong and China's mainland.
Konyn said the upcoming launch of the first open-end fund, mainly Hua'an Fund, in China's mainland will allow individual investors to have access to professional fund management and help them to manage risk profile.
"Individuals get a lot of benefit from the open-end funds," he said. "It will help investors generate capital value, hedge against inflation, accumulate wealth and it will be an important way of indirectly helping the economy."
Fund industry emerged in Hong Kong in the early 1980s. Mutual fund or unit trust, which runs in the form of open-end fund, has won increasingly popularity among Hong Kong investors.
Konyn said the mutual fund is a good complement to other ways of investment and relevant in a society with a professional middle class.
"People must own enough to save for retirement and long term issues. You need these elements before mutual funds in a society become very widespread," he said.
He said China's mainland certainly has the potential to be a big market for mutual funds, or open-end fund, and the fund industry may develop first in big cities like Beijing and Shanghai, where the middle class may drive the development of the industry.
He said the capital market development is surprising in the Chinese mainland, where it seemed impossible 15 years ago.
"Mutual fund is the next natural step in the revolution," he said. "It gives people choice and creates individual wealth."
"However, mutual fund isn't a bank account. It does not contain any guarantee. Investment is not speculation. We must realize it," he noted.
Konyn said mutual fund also brings greater competition in raising funds and helps speed up the restructuring of the mainland companies.
"Fund managers will be more focused on performance of companies, meaning that only better companies can get capital. That creates not only competition between business level for companies, but creates competition for capital," he said.
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