U.S. Markets closed

Can You Get $10 Billion of Stock Orders in 10 Hours?

Shuli Ren

(Bloomberg Opinion) -- The last place on earth where bankers and traders can make real money is opening up. 

As part of its trade deal with the U.S., China vowed to grant Western financial institutions more access to its $14 trillion wealth-management industry. A number of foreign-controlled joint ventures with banks are in the works. Days before Christmas, Beijing approved the first one, a tie-up between Amundi Asset Management and a unit of Bank of China Ltd. Shortly afterward, China Construction Bank Corp. agreed to partner with BlackRock Inc. and Temasek Holdings Pte, while Industrial & Commercial Bank of China is flirting with Goldman Sachs Group Inc.

Millions of dollars are being thrown at this. JPMorgan Chase & Co. and Nomura Holdings Inc. are buying up extra office space in Shanghai, where staff could be paid more generously than in Hong Kong. Goldman plans to double its headcount in China to 600 over the next five years. But why would foreigners want to crowd into the world’s most competitive market? 

Simple: Investors in China still have faith in active managers. Last year, it took just 10 hours for a star stock picker to attract more than $10 billion in orders for his firm’s debut mutual fund.

Foreign firms might reason that they have deep talent pools, too. Bin Shi, a portfolio manager who has been with UBS Group AG since 2006, can churn out profit better than many of his mainland competitors. His Luxembourg-registered All China Fund returned 50% over the past year. By tapping into local banks’ distribution networks, Western asset managers could benefit from the army of retail investors that might come crowding in.

If allowed to compete, Wall Street managers could almost effortlessly bat local competitors away. After all, Beijing wants Chinese wealth managers to emulate the U.S. model. In the West, middle-class savers have built up their nest eggs with mutual funds. They get some sense of their risk-return trade-off by checking (sometimes obsessively) the charts and numbers that showcase the historical ups-and-downs of their fortunes.

Not so in China. Two years after the government unveiled sweeping rule changes, many products still carry the false perception of guaranteed future returns. It’s not uncommon for money managers to post these forecasts on their websites weekly. The concept of metrics like net asset value remain completely foreign to a money manager sitting in a Chinese bank branch. In that sense, Western competitors are miles ahead.

Then consider the options. If Chinese savers looked at BlackRock’s range of offerings, for example, they’d be blown away. Some funds are designed to help you retire by 2040, while others are more tactical in nature. Blending bonds with stocks in a portfolio is commonplace, and financial metrics such as the Sharpe Ratio or effective duration for fixed income funds are readily available for savers to peruse, if they decide to get a bit technical.

In China, investments that can deliver steady, stable gains are rare. Moms-and-pops are stuck with either bank deposits, which are essentially subsidies to the state-owned banks, wealth management products — nowadays pretty boring, thanks to Beijing’s sweeping rule changes to limit risk — or speculative private funds that can cost you dearly.

To Beijing’s credit, foreigners have a fairly level playing field in the asset-management business. The new rules, which require banks to spin off their wealth units, are re-drawing the landscape entirely. The first such operation opened for business just six months ago, and there are now about half a dozen. It wasn’t until early December that the government even finalized net capital rules for these operations. So assuming the likes of Goldman and BlackRock can get their licenses quickly, their peers won’t be that far behind. That’s quite a positive step for a country that actively blocks Alphabet Inc.’s Google and Facebook Inc. to allow its domestic players flourish.

Of course, we all know the realities of marriage: Whether a partnership yields happiness is anyone's guess. But that shouldn't discourage Western asset managers from trying. There's plenty of money to be made.

To contact the author of this story: Shuli Ren at sren38@bloomberg.net

To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.

For more articles like this, please visit us at bloomberg.com/opinion

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.

  • Here are Warren Buffett's top 15 stock holdings
    Business
    Yahoo Finance

    Here are Warren Buffett's top 15 stock holdings

    Some of the top holdings include American Express (AXP), Apple (AAPL), Bank of America (BAC), and Delta Airlines DAL , according to Buffett's widely-read annual letter. Buffett wrote that he doesn't view these investments as "stock market wagers — dalliances to be terminated because of downgrades by 'the Street,' an earnings' miss,' expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour." Rather than stock holdings, Buffett views these as companies Berkshire Hathaway "partly owns."

  • Here's what smart investors do with their 401(k)s when the stock market is hitting highs
    Business
    USA TODAY

    Here's what smart investors do with their 401(k)s when the stock market is hitting highs

    Rarely do investors consider defensive moves in their 401(k)s when stocks are  rallying, but that is precisely when you should begin thinking about diversifying your investments. When stocks get squirrely, I recall a comment from my old colleague, Noel, who used to declare, 'Well, it's either the warning bell or the dinner bell.' More often than not, as we have discussed in previous columns, it's the dinner bell. From the time I began investing in 1987 through last year, stocks, as measured by the Dow Jones industrial average, have generated positive returns in 27 of 33 years, or 82% of the annual periods over that time span.

  • Business
    Barrons.com

    If Coronavirus Is Killing Fewer People Than the Flu, Why Has Beijing Quarantined Millions?

    China's Leaders on the Hot Seat Market Intelligence Report by TIS Group Feb. 21: Over the past several days, we have detailed some, though not all, of the actions being taken by China's government to control the coronavirus outbreak. I was told today that roughly 50,000 people die in China each year from the flu. If the coronavirus is just another flu-like virus and the current death toll really is about 2,000, not 50,000, why then has Beijing locked down 750 million people?

  • Millions of Chinese Firms Face Collapse If Banks Don’t Act Fast
    Business
    Bloomberg

    Millions of Chinese Firms Face Collapse If Banks Don’t Act Fast

    “If we can't pay back the bonds, it will be very, very bad,” said Brigita, whose company has 10,000 employees and sells mid- to high-end car brands such as BMWs. With much of China's economy still idled as authorities try to contain an epidemic that has infected more than 75,000 people, millions of companies across the country are in a race against the clock to stay afloat. While China's government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation's private businesses say they've been unable to access the funding they need to meet upcoming deadlines for debt and salary payments.

  • Business
    Benzinga

    Barron's Picks And Pans: AT&T, Kroger, Virgin Galactic And More

    Cover story "Wall Street Takes Over Main Street" by Daren Fonda and Andrew Bary shares why the Morgan Stanley (NYSE: MS) deal for E*TRADE Financial Corp (NASDAQ: ETFC) heats up big banks' race to land more retail investors. Jack Hough's "It's Time to Build a Stake In Caterpillar" suggests that earnings could be bottoming out at construction, mining and energy and transportation machine maker Caterpillar Inc. NYSE: CAT).

  • Morgan Stanley is paying $2,500 per customer for E-Trade. You can earn a $3,500 sign-up bonus for signing with a new broker — with one major catch
    Business
    MarketWatch

    Morgan Stanley is paying $2,500 per customer for E-Trade. You can earn a $3,500 sign-up bonus for signing with a new broker — with one major catch

    If the latest Wall Street mega-deal doesn't make you want to switch online brokerage accounts for a lucrative sign-up bonus, maybe it should. Wall Street giant Morgan Stanley announced an agreement Thursday to pay $13 billion to acquire the online brokerage E-Trade which has 5.2 million customer accounts. “The combination will significantly increase the scale and breadth of Morgan Stanley's Wealth Management franchise, and positions Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments,” Morgan Stanley said in a statement.

  • Bernie Sanders isn’t a democratic socialist. He is a social democrat
    Politics
    Quartz

    Bernie Sanders isn’t a democratic socialist. He is a social democrat

    Democratic primary frontrunner Bernie Sanders took home a second win last night in the Nevada caucuses, where he dominated the polls and got 46% of preferences—more than twice as many as Joe Biden, who came in second with 19.6%. Sanders, who earlier won New Hampshire's primary and essentially tied rival Pete Buttigieg in the Iowa caucuses, is gaining undeniable momentum. In a tweet commenting on the results, Donald Trump rejoiced that Sanders was winning the state, encouraging him not to “let them take it away from you” (presumably, “them” is the Democratic party establishment).

  • Bearish Bets: 2 Stocks You Should Consider Shorting This Week
    Business
    TheStreet.com

    Bearish Bets: 2 Stocks You Should Consider Shorting This Week

    Using recent actions and grades from TheStreet's Quant Ratings and layering on technical analysis of the charts of those stocks, Trifecta Stocks identifies five names each week that look bearish. While we will not be weighing in with fundamental analysis we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Dillard's Inc. recently was downgraded to Hold with a C+ rating by TheStreet's Quant Ratings.

  • Buffett defends stock investments
    Business
    Reuters Videos

    Buffett defends stock investments

    Warren Buffett's company provided disappointing returns to shareholders last year, but on Saturday, the billionaire investor vigorously defended Berkshire Hathaway's move to invest heavily in stocks of companies like Apple. In his closely scrutinized annual letter to shareholders, the man known as the "Oracle of Omaha" for his investing prowess called stocks a far better bet than low-yielding bonds in light of low rates for interest and corporate taxes. He said he would prefer buying whole companies but argued that stocks often are the better bet.

  • Boeing finds debris in fuel tanks of many undelivered 737 MAX jets
    World
    Reuters

    Boeing finds debris in fuel tanks of many undelivered 737 MAX jets

    Boeing Co has found debris in the fuel tanks of dozens of undelivered 737 MAX jets amid ongoing inspections as the Chicago-based planemaker struggles to restore the trust of airlines and the wider public in the grounded fleet. Boeing found debris in the fuel tanks of about 35 aircraft, a company spokesman confirmed on Friday. A person familiar with the matter told Reuters that more than 50% of the undelivered 737 MAX jets inspected thus far have had debris found in them.

  • Business
    Bloomberg

    Tesla Rival Sets Out to Banish 160-Year-Old Lead Tech From Cars

    These may help eliminate lead-acid batteries, a piece of technology invented in 1859 that still lurks under the hoods of Teslas in addition to the main lithium-ion power source. Supercapacitors have some way to go before they are widely adopted. There is still a gap with the popular lithium-ion units on how much energy they can store, Skeleton Chief Executive Officer Taavi Madiberk admits.

  • Warren congratulates Sanders on NV, hits Bloomberg
    Politics
    Associated Press Videos

    Warren congratulates Sanders on NV, hits Bloomberg

    Speaking to a crowd of thousands in Seattle, Elizabeth Warren congratulated Bernie Sanders on his victory in Nevada's caucuses and thanked the state for keeping her in the game. She also took on her newest Democratic opponent, Mike Bloomberg. Feb.

  • NVIDIA Corporation Just Recorded A 5.1% EPS Beat: Here's What Analysts Are Forecasting Next
    Business
    Simply Wall St.

    NVIDIA Corporation Just Recorded A 5.1% EPS Beat: Here's What Analysts Are Forecasting Next

    Last week saw the newest yearly earnings release from NVIDIA Corporation (NASDAQ:NVDA), an important milestone in the company's journey to build a stronger business. NVIDIA reported US$11b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$4.52 beat expectations, being 5.1% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of.

  • Warren Buffett Flashes ‘Urgent’
    Business
    Bloomberg

    Warren Buffett Flashes ‘Urgent’

    It's evolved over time into what reads like a love letter to shareholders, to insurance float — the lucrative gift that keeps on giving at Berkshire — and to America as a whole, while taking the occasional jab at Wall Street's fee-giddy bankers and anyone who thinks Ebitda is an honest profit gauge. Berkshire had $128 billion of cash as of December, about the same level as the previous quarter and many billions more than Buffett would like to see sitting in a bank. The letter, one of two major yearly events for Berkshire investors and Buffett groupies (the other is the shareholder meeting each May) has become more condensed in recent years.

  • 3 Monster Growth Stocks Primed for Further Gains
    Business
    TipRanks

    3 Monster Growth Stocks Primed for Further Gains

    As Wall Street observers gauge the strength of a particular investment opportunity, often, they will filter out the noise and instead, concentrate their attention on its long-term growth prospects. Setting out on our own search, we used TipRanks' Stock Screener tool to pinpoint 3 stocks that have earned “Strong Buy” consensus ratings from the analysts and boast substantial upside potential from current levels. Selecta Biosciences believes that its ImmTOR immune tolerance platform can help patients fight rare diseases.

  • Business
    Barrons.com

    Stocks Are Wobbling. Investors Saw It Coming.

    Yet the amount of money that has gone into exchange-traded funds tracking the broad market, rather than riskier areas, points to a degree of caution that should serve people well if stocks do drop. Almost as much money has gone into bonds as to equities. From the start of 2019 through the end of January, ETF investors allocated $168 billion, net of withdrawals, to equity ETFs, according to (MORN) Direct.

  • Analysts: These 3 Tech Stocks Won’t Stay Under-the-Radar for Long
    Business
    TipRanks

    Analysts: These 3 Tech Stocks Won’t Stay Under-the-Radar for Long

    Like many small-cap tech companies, Allot reported a net loss per share in the quarter, of 5 cents. This didn't scare off investors as the stock is up 41% so far this year. Looking ahead, Allot is confident in its ability to drive continued growth.

  • Business
    Barrons.com

    Virgin Galactic Stock Is on a Tear. This Other Asset Is Doing Even Better.

    Instead of buying stock from another holder when exercising a call option, a warrant holder will buy shares from the company, in this case Virgin Galactic. The company will take the cash from the warrant holder and issue new shares. It's one way for a company to raise capital.

  • 9 secrets of dividend investing, from a couple of stock pros who beat the market
    Business
    MarketWatch

    9 secrets of dividend investing, from a couple of stock pros who beat the market

    Go with dividend growers: Dividend stocks outperform, as a group, but companies with a history of increasing dividends do better, whereas companies with flat dividends tend to be more average. You want to own shares in companies that are likely to continue hiking dividends. To find those, look for these next four qualities.

  • Business
    Benzinga

    Notable Insider Buys Last Week: Moderna, Tesla And More

    Tesla Inc (NYSE: TSLA) CEO Elon Musk took advantage of the recent secondary offering. Via trust, he picked up more than 13,000 shares of this electric vehicle maker at $767.00 apiece. That cost him just shy $10 million.

  • Here are 25 Dividend Aristocrat stocks screened for ‘quality’
    Business
    MarketWatch

    Here are 25 Dividend Aristocrat stocks screened for ‘quality’

    The managers give practical advice, including focusing on companies with consistent records of increasing payouts, with high returns on capital and moderate dividend yields. A high dividend yield may be a signal that a majority of investors don't trust the company to maintain the payout. A dividend cut is typically associated with a severe drop in a company's stock price.

  • I’m 40, will get a pension and have $60,000 saved for retirement. Should I borrow from it to pay off $17,500 in credit card debt?
    Business
    MarketWatch

    I’m 40, will get a pension and have $60,000 saved for retirement. Should I borrow from it to pay off $17,500 in credit card debt?

    At that time, I will have 30-plus years on the job with a pension giving me 70% of my current income with a cost-of-living annual percentage increase around 2% or 3%. Is it a good idea to borrow from your 457(b) plan to pay off credit card debt? You're not alone in your struggle with credit card debt: More than half (55%) of U.S. adults who have credit cards say they also have debt, a survey from CNBC and Morning Consult revealed in 2019.

  • ‘Overprotected’ investors could get stung in the next recession, warns top Barclays strategist
    Business
    MarketWatch

    ‘Overprotected’ investors could get stung in the next recession, warns top Barclays strategist

    Rattled by rising non-China coronavirus cases — notably in South Korea — investors appear unwilling to load up on stocks heading into the new week. Welcome to the world of helicopter investing and our call of the day from Barclays Wealth Management's chief investment officer William Hobbs, who finds overly anxious investors living in the “long shadow” caused by the financial crisis. “The most common narrative in markets is what to do when the next recession comes along — own Treasurys, own gold, own quality to such an extent that my concern would almost be that if the next recession is of a more normal variety, such as a stock retracement of 10% to 15% and moderate declines in unemployment, you'll find that you have overprotected yourself and the underperformance could actually be in the areas which you thought were giving you safety,” Hobbs told MarketWatch.

  • Business
    GuruFocus.com

    Takeaways from 2020 Warren Buffett Shareholder Letter

    Berkshire earned $81.4 billion in 2019 according to generally accepted accounting principles (commonly called "GAAP"). The components of that figure are $24 billion of operating earnings, $3.7 billion of realized capital gains and a $53.7 billion gain from an increase in the amount of net unrealized capital gains that exist in the stocks we hold. GuruFocus has detected 6 Warning Signs with BRK.A. Click here to check it out.

  • Business
    TheStreet.com

    Respect the Reversal: Cramer's 'Mad Money' Recap (Friday 2/21/20)

    The most important thing investors need to know about next week's trading is that the coronavirus will color everything, Jim Cramer cautioned his Mad Money viewers Friday. There will be a ton of earnings coming out next week, but if the coronavirus is not contained, none of them might matter. Moving to Tuesday, Cramer liked Home Depot , Salesforce.com and Toll Brothers , but said to stay away from Macy's and Virgin Galactic .