US$45 billion in mutual fund inflows forecast for China’s Nasdaq-style tech board
- Prediction made by Hu Lifeng, chief fund analyst for China Galaxy Securities
- 31 asset management funds have submitted applications for 43 mutual funds
The study comes as at least 31 Chinese asset management firms have submitted applications for 43 mutual funds to the securities watchdog, information available on the China Securities Regulatory Commission website showed on Monday.
Hu Lifeng, chief fund analyst for China Galaxy Securities, said in the research note that 100 billion yuan could come from newly established mutual funds, 100 billion yuan from existing stock positions in the market, and the rest from special funds dedicated for strategic IPO investing.
CSRC website show Wanjia Asset Management has four of its applications accepted followed by three each from China Asset Management, GF Funds, and China Southern Fund Management.
The tech board was first announced by Chinese President Xi Jinping in November and will pilot a registration-based system for initial public offerings, which has less stringent listing rules.
Market observers see it as potential competitor to other listing hubs such as Hong Kong and New York.
This is a key initiative by China to provide domestic funding support to its hi-tech, innovative start-ups, allowing them to compete on a global level in key areas like microchips, automation and self-driving cars.
The CSRC unveiled regulations for the tech board on March 1, which will focus on sectors with “strategic significance” to China, such as hi-tech equipment manufacturing, biotechnology, big data, new materials, and some sensitive technologies like network information technology. The board will allow pre-profit firms and companies with weighted voting rights to list.
“The tech board has set threshold for individual investors to directly participate – 500,000 yuan in investment capital and two years of trading experience. But they can invest through mutual funds and rely on professional fund managers to pick the stocks, ” said Yang Delong, managing director for Qianhai Kaiyuan Fund Management.
“This is also an opportunity for mutual funds.”
According to estimates by the Shanghai Stock Exchange, only three million individual investors on the A share market meet the eligibility requirements for the tech board, or 2 per cent of the total pool.
It means the tech board will be a market mainly for institutional investors at least for now and most individual investors will not be able to directly trade the stocks on the board, but mainly through mutual funds.
According to current stock market rules, funds that contain “technology and innovation board” in their names have to invest at least 80 per cent of their non-cash assets in stocks on the board.
At the end of last year, mutual funds held 1.47 trillion yuan worth of A shares, 48 billion yuan worth of Hong Kong stocks through the Stock Connect schemes, and 42.6 billion yuan of foreign stocks through the Qualified Domestic Institutional Investor programme.
