UBS Group Plans to Boost Asset Management Business in China

UBS Group AG UBS is mulling to use the new relaxed regulations in China to its advantage by strengthening its asset management business. The news was reported by Bloomberg.

China’s government opened its asset management markets wider for foreign firms, starting Apr 1, 2020. Under the new rules, asset managers across the globe can apply for wholly owned fund management licenses, which would grant them full control of mutual funds in China.

Further, global wealth firms, which are not financially strong to make significant investments, can apply for private fund management licenses, which will allow them to raise yuan-denominated funds from qualified clients to invest overseas.

Lastly, global asset managers can opt for boosting their ownership of existing joint venture (JV) partnerships in China to 100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.

UBS Group has long enjoyed a leading position in China compared with other foreign peers. The bank has been able to obtain licenses of services from banking and securities to fund management. Also, the article reported that UBS Group was the first global manager to win control of a local securities joint venture in 2018.

“We’re not ruling out any opportunities,” the article quoted Raymond Yin, head of Asia Pacific for UBS Asset Management. “We will continue to invest in the China market to maintain our leadership position.”

Also, Yin informed that the lender plans to grow its employee count in China for the money-management unit by double-digits over the next few years.

The Swiss bank’s private funds have been able to generate positive returns this year, despite disruptions caused by the pandemic and competition from new entrants. Also, the bank’s Asia Pacific head is based in the mainland, whereas the peers are operating from bases in Hong Kong or Singapore.

Our Take

UBS’ restructuring initiatives to invest in profitable areas to better serve clients is encouraging. In late August, the bank was granted approval by the Brazilian central bank for setting up a majority-owned JV in Brazil.

However, the top line remains under pressure due to persistent negative interest rates in the domestic economy.

UBS has gained 44.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} over the past six months on the NYSE compared with 17.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} growth of the industry it belongs to.

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In addition to UBS Group, various global finance companies are seeking to expand operations in China. Many of the firms have already started taking advantage of the available options therein. In early September, Citigroup C became the first U.S. bank to get a domestic fund custody licence from China-based regulators. Several other firms like Goldman Sachs GS, BlackRock, Nomura Holdings NMR, Morgan Stanley and JPMorgan have either won approval or are waiting for the same to increase stakes in their respective JVs in the country.

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