Fortis China eyes $500 mln QDII fund

By Tony Munroe and Charlie Zhu

SHANGHAI (Reuters) - A Chinese fund management joint venture co-owned by Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz)(FOR.AS: Quote, Profile, Research, Stock Buzz) expects its maiden fund enabling mainland Chinese to invest overseas to hold assets of at least $500 million, the head of the venture said on Wednesday.

Tian Rencan, chief executive of Fortis Haitong Investment Management, also said he expected the joint venture to begin advising a new fund focusing on overseas-listed Chinese companies that would be sold through a partner to Japanese investors.

That fund would be similar to an offering through a South Korean partner early this year, and could be followed by launches elsewhere in Asia, such as Singapore and Hong Kong, Tian said.

Fortis Haitong is among a handful of Chinese fund management firms with preliminary clearance to sell products holding overseas stocks to mainland Chinese under the Qualified Domestic Institutional Investor (QDII) scheme.

Tian said he was confident that Fortis Haitong could secure an adequate foreign exchange quota from Beijing for investing in overseas stocks, given China's wish to promote capital outflows.

"I do not foresee any trouble in getting the quota, because if you understand the macro picture, we have to balance the inflow with the outflow," Tian said at the Reuters China Century Summit in Shanghai. "We need to encourage some money to go out."

As for the potential size of Fortis Haitong's QDII fund, Tian said: "I personally do think that a minimum US$500 million should be OK. Why not $1 billion? Everything is possible."

A rival fund manager, China Southern Fund Management, became the first to unveil its QDII plans when it said on Monday it would launch a fund next week.

The Shenzhen-based asset manager said it had applied to regulators for a 15 billion yuan ($1.99 billion) quota for the stock fund, which would be launched on September 12 and closed for subscription on September 28.

LEVERAGING CHINA

Fortis Haitong Investment Management is 49 percent-owned by Belgian-Dutch financial services group Fortis. Haitong Securities (600837.SS: Quote, Profile, Research, Stock Buzz), a top-10 China brokerage, holds the rest. Fortis Haitong is a mid-sized player in China's mushrooming funds industry, with assets under management of about 80 billion yuan.

Fortis Haitong is looking to leverage its China expertise to a broader audience by acting as a subadviser on funds offered to foreign investors and by tracking overseas-listed Chinese stocks from its Shanghai base.

"We should be the best managers for any overseas-listed (Chinese) stocks because their operations are in China. We really research those stocks," Tian said.

He said analysts in Hong Kong who cover Chinese firms listed there tend to focus on big names to the exclusion of other stocks.

"Most of them are under-researched. Why is that? Because many managers in Hong Kong are more asset allocation-type managers," said Tian, who has worked for Fortis for 15 years.  Continued...