slowdown poses biggest challenge to UBS in China
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[March 17, 2016]
By Engen Tham
SHANGHAI (Reuters) - A slowdown in the pace
of deregulation is the biggest challenge facing UBS AG in China, an
executive at the Swiss bank said as it opened a branch of its wealth
management business in Shanghai on Thursday.
China's attempts to stem capital outflows as a result of a
depreciating yuan have led Beijing to backtrack on plans for greater
market liberalization, such as the temporary suspension of
initiatives designed to open up outbound investment.
"The biggest challenge here is the pace of deregulation," Kathryn
Shih, Asia pacific president at the world's largest wealth manager,
Shih noted a slowdown in the Qualified Domestic Institutional
Investor (QDII) program, which allows Chinese banks, insurers and
mutual funds to buy offshore stocks and other securities on behalf
of clients and is one of the ways Chinese firms and individuals can
get money out of the country legally.
"There was a lot of deregulation last year, people were talking
about QDII2, but with the market volatility some of that has slowed
down, so that's challenging for us," Shih said.
UBS wants more of the QDII quota made available in the market so
that the Swiss bank can offer products from global markets, she
Sources told Reuters in January that Chinese regulators had asked
several domestic funds to postpone issuing new outbound investment
products to stem capital flight which was undermining the value of
the yuan and worrying global investors.
The push by UBS into China comes against a backdrop of challenging
conditions such as interest rate pressure and lower activity in
investment banking advisory business, highlighted by its chief
executive Sergio Ermotti on Wednesday.
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These headwinds have not deterred the bank, which said in January it
was planning a hiring spree for its China wealth management
And despite the strong domestic competitors UBS plans to invest
long-term in the Chinese market, deciding that in order to get its
name known it had chosen a strategic location in the middle of
Shanghai's commercial center to plant its flag.
The plush new premises, with tastefully exposed brick-work and a
heated toilet seat for its VIPs, is situated in the affluent
UBS already has wealth management offices in 10 locations across six
countries in Asia Pacific, with assets under management of 272
billion Swiss francs ($281 billion)at the end of 2015.
(Editing by Alexander Smith)
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