New China SP venture may raise initial $640m

A new Shanghai-based asset management company specialising in capital-protected products will launch its first product in March next year, and will initially raise up to $640m, according to a launch announcement from its chairman. KBC Goldstate FMC, a joint venture between Belgium’s KBC Asset Management and Chinese partner Goldstate Securities, has received its business license from the China Securities Regulatory Commission and became operational yesterday.KBC paid RMB73.5m (US$9.35m) for a 49% stake in the joint venture, and Goldstate Securities holds the remaining 51%.

KBC Goldstate will become China's first asset manager to ensure all its products guarantee the return of principal over specific time periods, chairman Peng Zhenming told a news conference yesterday. The firm’s product set is expected to include fixed-term offers as well as open-ended balanced funds with periodic guarantees.

KBC's experience in operating principal-guaranteed funds will bring significant expertise to the venture, said KBC Asset Management chief executive Stefan Duchateau. Peng added that China's proposed launch of stock-index futures early next year will bolster the firm’s hedging capabilities.

Peng said he expects the company to break even in two years, with assets under management growing to between 7 billion and 8 billion yuan by the end of 2008. "We will raise between 2.5 billion yuan (US$319m) and five billion yuan initially in the hot fund market," said Peng. "Our target clients will be those who prefer low risks, but want investment returns higher than bank deposits."

KBC joins over 20 global financial firms competing in China’s potentially lucrative money-management sector. The country has US$2tr in personal savings, a significant proportion of which both the government and the infant asset management sector hopes to divert to higher-returning investment vehicles.

Over the past few years KBC has expanded from its lowlands base into Eastern Europe and Asia. The group opened a representative office in Shanghai in December 2004.