Foreign funds in China gear up for profitless decade

["Ulhas Joglekar" <joglekarulhas@xxxxxxxxxxx>]

The Financial Express

Tuesday, February 19, 2002

Foreign funds in China gear up for profitless decade ahead

Hong Kong, February 18 : Foreign firms face a profitless decade developing
China's fledgling fund management market and when the earnings eventually
come, the industry must resist the temptation to cash in fast, a senior
executive said on Monday.
"I don't think we, as an industry, will make any meaningful money out of
China for at least five to seven years," Mr Michael Benson, chief executive
officer at Invesco Global, told Reuters.
"We are willing to make an investment in China because it will pay off, not
in five years and maybe not even in ten, but it will pay off eventually
because the industry is changing and at some point, China will supplement
Japan as Asia's most important economy," he added.
Foreign fund managers eagerly eye the estimated $100 billion hoard of
domestic savings that China's 1.2 billion people squirrel away each year,
while creating a deep and sophisticated fund management industry is crucial
to China's economic reforms.
Analysts say that the murky nature of Chinese financial markets, where
scandals are common, keeps many ordinary investors out. But industry leaders
say the presence of foreign firms would encourage retail investors to put
their savings to work through mutual funds and reduce China's need for
foreign capital inflows, which topped more than $40 billion in 2001.
"I believe it will. But I also think that this imposes on the foreign
companies a high level of responsibility," said Mr Benson, who heads the
non-US arm of Anglo-US fund house, Amvescap Plc, which manages some $400
billion of assets worldwide, around $3.5 billion of which are in ex-Japan
Asia.
"One does not want to see again what happened in India in the middle-1990s
when foreign firms went in, had some very bad performance and set the
industry back by five years," added Mr Benson, while he was in Asia to visit
clients around the region. - Reuters

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