Agricultural Bank of China in Fund Venture with Credit Agricole

Posted 08 January 2007 @ 10:06 am EET     Print     Reprint     E-Mail     Comments

SHANGHAI (AP) - France's Credit Agricole and the Agricultural Bank of China have won approval to set up a new fund management joint venture, a state press has reported.

The joint venture, which will include Chinese aluminium giant Chalco, will have registered capital of 100 million yuan (12.8 million dollars), the official China Securities Journal said. Agricultural Bank of China, one of the nation's big four banks, will hold the majority stake of 51.33 percent in the joint venture, while Credit Agricole will own 33.67 percent and Chalco 15 percent, the newspaper said.

The paper, citing unidentified sources, said the new fund management group was expected to launch its first product in the first half of this year, but provided no further details. Mutual funds are increasingly playing a bigger role in China's stock market, stemming from the government financial deregulation that began in 2004 which was designed to boost securities markets' liquidity.

Foreign investors and brokerages have seen these stock funds as a way in to tap China's more than two trillion dollars in household savings. The mutual funds are in part responsible for the recent stellar performance of China's stock markets, with the benchmark Shanghai Composite Index, ending last year at an all-time high of 2,675.47 points, up 130 percent.

The upward trend has largely continued into the first days of 2007. But amid the frenzied sentiment, the nation's securities regulator have warned fund management firms of the dangers of overly rapid growth in the industry. "With the rapid development in the industry and market, fund management firms should keep cool-headed," the China Securities Regulatory Commission said in an official notice last month.

"They must not seek quick profits or blind expansion and should do business according to their abilities." In one sign of the over zealousness, Beijing-based Harvest Fund Management, which is 19.9 percent owned by Deutsche Bank AG, raised in one day last month a record 40 billion yuan for a new stock fund.