German fund manager Allianz Global Investors (AllianzGI) is bullish on its outlook in Hong Kong and mainland China because of Beijing's focus on "high-quality growth" and a rising middle class, according to its global CEO.
China's pension reform and rising income of the middle class will create demand for wealth management, providing huge opportunities for fund companies, Tobias Pross said.
"Hong Kong is vital to our business because it is our headquarters here in Asia, and it is also because of the long term outlook on China which I remain bullish," said Pross in an exclusive interview with the Post.
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"China is going through a structural change. China in the past was the workbench of the world, but now it has leapfrogged to a high-quality growth economy," Pross said, citing the examples of the world-beating quality of Chinese-made electric vehicles, and the development of Beijing and Shanghai into top-level cities comparable with Tokyo or New York.
Allianz Global Investors is part of German insurer Allianz. Photo: Reuters alt=Allianz Global Investors is part of German insurer Allianz. Photo: Reuters>
"Beijing and Shanghai are clean and modern, while the people are friendly and the hospitality fantastic. People in these cities are hungry to be successful," he said.
Although China's property market, which accounts for more than 20 per cent of the country's GDP, has problems, the technology sector has been shaping up well and represents some 18 per cent of the economy, highlighting the potential for the structural trend to gradually supersede the cyclical one, Pross said.
"Based on these factors, AllianzGI has always believed China is a fantastic investment opportunity," he said. "We will continue to see the rise of the technology sector in China, and this will certainly overtake the challenges from a structural perspective.
"We said a decade ago that China would become an asset class itself like the US."
One of the reasons for AllianzGI's upbeat assessment about China is the fact that it has not invested in any real estate stocks in the country for that matter.
"We decided quite early that we were too late for the race in real estate," he said. "Now you can say that it was a clever decision, or we have been lucky."
The growing affluence of China's middle class bodes well for fund managers like Allianz. Photo: Bloomberg alt=The growing affluence of China's middle class bodes well for fund managers like Allianz. Photo: Bloomberg>
Pross was among the 300 top global financiers who attended the recently concluded Global Financial Leaders' Investment Summit organised by the Hong Kong Monetary Authority.
Pross is a frequent visitor to Hong Kong, mainland China and Asia, travelling to the region almost every month, due mainly to the fund manager's focus on Asia-Pacific. Even during the pandemic, he visited Hong Kong a couple of times.
The frequent visits are to prepare the groundwork for the company's expansion in mainland China, after regulators in August granted initial approval to AllianzGI to set up an onshore fund-management company. The operation could be up and running next year, subject to final regulatory approval. This will allow the firm to tap into China's US$3.8 trillion mutual fund market.
"The Chinese government is very serious about opening up and welcoming foreigners like ourselves," he said, pointing to Beijing's push to expand the nation's private pension scheme, the so-called third pillar. This third pillar joins the first pillar, the compulsory state pension, and the second pillar, voluntary additional contributions by state-owned entities, companies and their workers.
AllianzGI, which is part of German insurer Allianz, one of the largest financial firms worldwide, has decades of expertise in managing pension and life insurance. This, Pross said gives AllianzGI an edge in developing pension and wealth management services for China.
"We will increase our footprint in China, but we will do it in a very pragmatic way," he said.
The company now has approaching to US$100 billion in assets under management in Asia out of its overall total of US$546 billion.
"Asia now represents approximately 20 per cent of all our assets. I expect this will continue to grow because Asia is the strongest region in the world in terms of growth," he said.
"Hong Kong will take an important role in Asia because the city has a big pool of talent, where most people are well-educated and almost everyone can speak English."
