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Swiss-based bank UBS announced Monday that it will form a joint venture fund management company in China through the purchase of a 49 percent stake in Shenzhen-based China Dragon Fund Management Co Ltd.
The application has been delivered to the China Securities Regulatory Commission (CSRC) for approval, which follows the signing of a shareholder agreement and a sales and purchase agreement.
Under the terms of the deal, China Dragon will be restructured as a joint venture between the Hongtai Trust & Investment Co Ltd, a wholly-owned subsidiary of the State Development Investment Corporation (SDIC), and UBS.
The partners propose to use the existing China Dragon platform to launch new mutual funds and, as regulations permit, pursue discretionary investment management mandates.
"The proposed partnership represents an important step in UBS' broader China strategy," said Lord Brittan, vice-chairman of UBS Investment Bank, at yesterday's UBS China Conference 2005.
China Dragon, currently 100 percent-owned by SDIC, manages 3.2 billion yuan (US$387 million) in mutual funds assets.
Subject to CSRC approval, the joint venture will be one of the first to allow the new maximum 49 percent foreign partner-holding of a Chinese fund management company.
The partners have agreed that UBS will work with China Dragon's management to apply UBS' international experience in investment research, portfolio management, risk management, sales & marketing, operations, internal controls and compliance to the operations of the joint venture.
"China's fund management industry is growing rapidly and investors are becoming increasingly sophisticated," said Shi Hongxiang, SDIC's vice-president.
"SDIC is confident that working together with UBS, the joint venture will quickly become one of the leading asset management companies in China."
John Fraser, chairman and chief executive officer of UBS Global Asset Management, said: "China is a key strategic market for all of UBS. This is an important step in our strategy to build a major presence in China's asset management industry."
Brittan said at the conference that UBS will continue to look for opportunity to form joint ventures with domestic financial institutions in order to expand its capabilities and product offerings, especially in asset management and securities underwriting.
Local asset management insiders said as China's economy continues its rapid growth and personal wealth increases, the number of investment products has grown and stimulated demand for sophisticated financial instruments including risk management products.
"UBS is responding to these opportunities and is committed to be the foremost provider of the products which will be essential to the development of China's capital market," said Brittan.
UBS is applying to the State Administration of Foreign Exchange for a new investment quota, said Nicole Yuen, head of China Equities at UBS Investment Bank.
"We hope to obtain a quota of at least US$200 million to US$300 million from the administration. We will invest as much as we are given," Yuen said.
(China Daily January 25, 2004)
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