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Bill Lu, Thomas Fang, Robert Zhang, Han Wang, and Daju Gu Discuss Opening China’s Capital Market at Greenwich Economic Forum

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Bill Lu, Thomas Fang, Robert Zhang, Han Wang, and Daju Gu Discuss Opening China’s Capital Market at Greenwich Economic Forum

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Bill Lu, Thomas Fang, Robert Zhang, Han Wang, and Daju Gu discuss Opening China’s Capital Market at Greenwich Economic Forum (Greenwich, CT)

HIGHLIGHTS

  • In 2018, global investors poured an estimated $81 billion into Chinese startups
  • China’s service industry contributes to 50% of its GDP
  • Average deal size in China rose from $30 million in 2013 to $212 million in 2018

FULL COVERAGE

INTERVIEW TRANSCRIPTS: Bill Lu, Founder/CIO of Aspetuck Capital Management, Thomas Fang, Head of China Equities & Global Markets for UBS AG, Robert Zhang, CEO of DH Fund Management & AMAC, Han Wang, Chief Economist at China Industrial Securities, and Daju Gu, COO of tFOSE Group

Bill Lu – Founder/CIO, Aspetuck Capital Management: 00:00

Good morning. Thank you very much for coming to our panel. You know, the topic is about opening of China’s capital markets. I actually from yesterday, there have been plenty of discussions of all but fortunately we have a very distinguished panel speakers coming from very different backgrounds and hopefully we can, you know, offer additional insights to offer you that might be helpful. You know, I would like to introduce our speakers first. I think a mile was, so we actually all grew up in China and in the work of boasting in US and the China as well. So I’m actually a Quan PM for much of my professional life. So except for two years, I, I manage a hedge fund investment for Chinese investment corporation. So I actually have the least China experience.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 00:52

So that’s why I’m the moderator. They’re the speakers. Okay. So I’m just go, you know alphabetic order. So the first is actually my good friend Tommy Fang. He actually comes all the way from a Hong Kong and he’s heading UBS, China equities business and recently also added the fixed income business to his team. So we know that UBS is the first and still largest qualify foreign institutional investor in China and the largest market share for the stock. So, you know, Tommy actually regularly communicates, interacts with regulators industry experts and the media to help promote the reform in China’s capital markets. You know, but also he has over a hundred people reporting to him, so he commands a lot of resources.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 01:48

So if you need him. And so Daju who’ll sit next to me and he is a chief operating officer of tFOSE. Our torrent derivative exchange, so they actually have big plan to launch some products, futures, options, swaps. There’s actual link to China’s capital market. So that’s the, it will be another way to, for you to invest or have access or you know, the risk management about China, you know, from overseas, hopefully, so that, that’s their big pine. But I, you know, exchange it’s probably better businesses. So Robert is coming from China directly and that Robert is the CEO of one of the largest macro hedge fund based in China.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 02:53

I mean, I don’t know, five or six years, they have such a tremendous growth. I mean, they attract a lot of managers. The NUMs, so the fondant is actually a model, the of the Greenwich hetero industry, but except they have a lower tax. So that’s why they there growing so fast. I guess. So, yeah. The doctor Han Wang was coming from industrial securities, one of the largest security firms based in Shanghai. And the, he is a very, very good macro economist. And then he, again, he regularly interacts with the regulators. And the common agencies so he’s a, you know, expert on monetary policies, government policies. So we all know in China, one big difference is that the government does play a much bigger role in the economy and capital markets than what we probably are used to here. So he can give us a very good perspective on that on why China is opening up the financial markets and the what’s the sort of near term macro policies and the drivers for growth capital markets.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 04:00

So yeah, that’s a brief introduction. So I, you know, let me just say this, I think if you are a global asset manager it’s, if you cannot afford not to invest in China nowadays. So for me it’s almost like you’re saying, well, we could afford not investing in Europe. That’s how big Chinese markets is right nowadays. Right? The second largest equity market in the world, sort of largest bond market and they’re opening on the futures market. There’s a number of ways of doing that. And they’re also open up pretty I said pretty fast. I mean to by the China’s standards. So some of you may still see against the slow, but I compare it to my own experience like 10 years ago when we tried to open them obvious in China and it seems we could do, there to close little down basically.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 04:54

But now you can’t, you guys, there are so many ways of doing things there. And also, you know, it is sometimes difficult or understand China. I, you know, I say that from my personal experience even I grew up in China, but after I stayed in US for like three, four, five years, and then making some trips to China, I started feeling like, you know, I don’t know China that much anymore. So it’s just different, but it’s because it’s different. It gives you a lot of diversification benefits, right? So we will know about homing resin bites if you, you know, this is, this is how you get that diversification. And besides all the opportunities, the emails markets, which are, you know, much less efficient than what we see here. And we know how it’s hard to be SNP here and but there if you look at a lot of local managers, I mean, the, the performance gap over the index is a huge, we’re talking about 10, 15, 20% per year for 10 years consecutively. So you will see those kinds of returns. It’s because it just, you know, much less efficient market and you’re going to see a lot of opportunities do things right. So, okay, so residing any, you know, for talk for me. So let me just kind of get it to Tommy first. And the, you know, he will give us overview first of all, the various channels to invest in China, pros and cons. And then he got a lot of examples of active. Please.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 05:58

Thank you. Dr Lu. Good morning. It’s a pleasure to be here with the distinguished panelists and audience. So I’ve been in the industry for 20 years. It was, you know, Goldman, Morgan Stanley, but UBS has really I spend most of my career, so I still remember you know, back in 2003, 2004 when I commute between Manhattan and Stamford the UBS headquarter, always very proud to see the logo, you know, when I get off the train. So you some way I feel like Connecticut is my second home, you know, away from, from China. So it’s definitely good to be here. Dr Lu mentioned into the opening and also in terms of access platform. So before that, I just want to show as all of you know, wider view I’d be promoting in terms of the suite key trend for Chinese capital markets or the first being internationalization. And the second year is institutionalization and the third being innovation. So I hope I get to talk a little bit more for the second assert just to begin with, for the internationalization. So with the single, you know someone policy mechanism, especially for them for 2016 when China complete the stop can have program. So you might view, it’s really opening up potentially the golden decade for capital market opening for China.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 07:55

It is the second largest economy was a ttrillion in a US dollar equity market cabin asserting a trading US dollar bond market cap. It happened an abreast adding to the investment postpartum alpha and beta perspective. But it just opened up, especially from you know, full market participants like ourselves being there, really pushing us through the openings. Since early 2000. It was really 2016, 2007, he was really pick up the speed we’ve seen foreign ownership for the market has grown from 2% to somewhere around the current 4 to 6% based on different measures. But this is really far from any sort of mature capital markets foreign ownership, somewhere between at least 10% to up to 40%. So this creates huge opportunity for global managers to look for offer and diversification on a global basis.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 08:59

But internationalization is not only a global investor coming into China, but also for the wealthier high now whilst the individual and that use to sharing investor domestically in China, really looking beyond their home country and diversify their asset class to the global markets which will potentially adding to a lot of the positive dynamic into the capital markets. In terms of the overall access into China. So many ways I would just simplify it narrow down to three platform which probably most relevant to the audience here. The first is Q fee you apply an institution investor status to US into the China capital market. And the second, which is really picking up this theme is the programs, either stock or bond connect sewer, the platform for our Hong Kong. The third, which is increasingly focused by global manager is the WOOFE a wholly foreign owned entity where, or you can set up your research and investment vehicle in China.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 10:09

So using our analogy. So the QV is more like you apply for sort of a frequent visa to China. You establish that relationship and a status to go there and the connect is more, you still travel through Hong Kong. I’ve very developed a crypto market. You feel well have that comedians but also a bit of a distance. How do you access, whereas the WOFE is really, you apply our local ID and you know, really set up some other status onshore. But just to share with all of you some of that data and the pros and cons, I think for Q fee and connect combined now global investors ownership into the equity market. Now it’s roughly about 270 billion US dollars, but that’s depending on how you measure the free flow. It’s close to 6, 7% of the whole market. You need to know the free flow ownership.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 11:03

Six, seven still sounds relatively small, but that’s already on par with the domestic mutual fund ownership and also insurance company and our local pension. So global investor is playing a very important role in terms of investment style. You know, putting more emphasis around governance and also transparency or the listed company. So this is really increasing steam and Q fee really give you the full access beyond stock and enlisted bond market, but also you can invest into the IPOs and the tech board and participate blogs and all the other instruments around the domestic capital market before connect is really where I would say the heaven of global Quang where they are looking for a globalized their strategy, the China space. If you look at the overall turnover, so now connect already command somewhere between 6 to 7% of the whole market turnover and risk the overall turnover ratio.

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 12:08

People have this notion domestic style market for China have a lot of retail your term quite a bit. But if you look at connect, the overall average turnover ratio is about 3% daily, which is triple of the overall market. You can see a lot of the more high frequency top off qualm manager of really finding the return as their strategy of walking into the China market SUTA connect scheme. So that’s where, you know, a lot of the focus has been in this community amount of qualm manager. Last but not least, just to share some data WOFE but that’s how you set up a local global, you know, foreign owned managers onshore. So since 2016, the scheme started. So now there are 22 global houses those up public information including the loudly black rock, Vanguard, the war, but also, you know, the shore. Two Sigma, most reason 22 managers already set up local presence and it starts to making investment raising funds in China. So far it’s just the beginning. 56 products onshore have raised $1 billion. I can definitely see that continue to grow.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 13:28

That was a great discussion. So yeah, let’s turn to Robert and they just, you know, give us some local perspective, truly local perspectives. One of the largest hedge fund managers in China.

Robert Zhang – CEO, DH Fund Management & AMAC: 13:39

Okay. Thanks Bill. Actually this is a certain time for me to be here. You deliver a hotel, you know, actually it was back about six years ago was a Chinese garment to legalize the hydrophone the sectors provincial government, which are junk problems. They want to build a hydrophone con like what we have here at Greenwich. So they let the lead official delegate really keeps Cleo, you know, officials from province, government, municipal government and as we are as a district over there and after, since that period, actually I think it’s a four for the first time in 2015, you know, the Honjo municipal government is the first ever alternative, the maximum to global UMass.

Robert Zhang – CEO, DH Fund Management & AMAC: 14:29

I’m in a Samad being holding Honjo and a James and the bruise there was there since that period as he went to Hondo four times among the past, the five San mate, you know, it was a very, it just like I recently in China as its own as a garden to legalize the something is a tender to grow rqapidly for example, like back to 2015 as that 10 time total AUM for Kartra pharma sector or what we call the PFM private fund manager is a 300 billion RMB, but the rhino is a two pound through truly RMB resolve, barter E saws and the 800 privately to fund the managers in China right now. So you can see the private fund managers had been playing increasingly important rules in China’s capital market. It’s just like Tommy said, you know, foreign investors, right now’s it accounts for about 60% of the total market cap.

Robert Zhang – CEO, DH Fund Management & AMAC: 15:36

But back to a Tucson assignment, a mutual fund is the single largest, the market player eight accounts for about a hundred percent of a total map tab. So by the end of this first half of this year for institutional investor accounts for about 6% mutual funds, our council about a 6 to 7% PF accounts for about a 6%. So different institutionary masters are starting increasing their you know, influence on, Capital market in China. But overall, you know, in China right now there there’s a 100 attendees, 3 trillion AUM for all asset management. And so for hedge fund managers, we account for only 1.5 percentage of the total AUM. But I have been visiting Greenwich, New York, San Francisco lot, you know, my finding is that like a private of a PFM.

Robert Zhang – CEO, DH Fund Management & AMAC: 16:44

I mean, China is a, what a we are right now is exactly what it was for hydrophone the sector in the United States back into, to silent, you know, right before and after the tech of bubble. Lots of a market player interning into this market to try and guide as a, a macro shear. But since the market crash in 2015 are you share a market the sector starting to consolidate right now for top 25 because the in China I ran out there only 25 high to fund the managers with AUM larger, larger than 10 billion RMB. The top part of top 25 market players accounts for about 33 or 32 total AUM sectors. But just like last year say I honestly, you know, started as this open your app of a PFM sector to overseas players.

Robert Zhang – CEO, DH Fund Management & AMAC: 17:49

Right now they’re about a 21 WFOE you know, as a, as a wholly owned the foreign market players for hydrophone pharma sectors being approved with the right, the launched about a Samsung, like a third age product with a totally AUM amassing your presence by the end of this first half of this year, I bought a 500, 2 billion. RMB is still relatively small, but going forward I assume because it’s the decision makers in China, the middle East determinations to further open up PFM sector for overseas market players. So I as a on the ground the market player I think, cause there are two challenges, you know, is a, what do we have, you know, for foreign market players, you are going to have an home. The first the why is that the overall capital market in China is still retail investor driven market.

Robert Zhang – CEO, DH Fund Management & AMAC: 18:45

Because if you look at it as a sharp ratio for Shanghai composite index for his C I 300, the sharp ratio is only one third over that as on the biggest, the Jordan for the market is a Potter two times the larger design as MQ and the Eva, it says it has seem under two for four, the bottom market. So I think by nature because of this is a retail treatment market, it says the volatility’s huge. That’s a way, you know, like a Bill mentioned that, you know, they’re still a big performance gap for the professional market player was there. So you know, it was an index or the retail investor opportunities clear and the sanctuary because of as a it’s a retail driven investors, the regulators in China, they tended to overprotect retail investors.

Robert Zhang – CEO, DH Fund Management & AMAC: 19:47

That’s why for the development it’s very important for us. We needed to, you know we needed to have a much less jaw downs for our class. So if you don’t have enough derogative to hydrate your risk, how possible you can’t have a much smaller jaundice. So that’s why I think you know, as a local player, we are, we all come to have more and more foreign players because we needed to work together to educate to regulators. You know, for the benefit of this country is long run, we don’t need it to overprotect retail. You masters are creating volatility. So this is a first the challenge, this is a retail driven market and the volatility is huge. You need to have a modern gravity to you know, to decrease your drawdown. For all of his you know, he, he saw it in the Foundry to PFMs in China.

Robert Zhang – CEO, DH Fund Management & AMAC: 20:53

I think 80% of PFM strategy. And for most of us, you know, our clients are from say us China or the banking system, you don’t have much access to your collateral. You have to sell your product through the banking system. So I think that this, we will be much difficulty for foreign players because the whole possible you know, so many high net whales, individuals, your local market just like us, you know, we are in Jujan province. Jujan province ranking the number two in terms of total number of a public listed company in China. Number one is come home promise. They have something like over 600. The public, at least the combination will never, you’ll have so many companies, you have lot of Highness and reality individuals. But in Jujan province we have over four hundreds. But we, for us, we are local players. So we have our ways to connect the resolve of class, but it will be much more difficult for foreign players. That’s a second of challenges. Yeah, that’s pretty much for me. Thank you.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 22:03

Okay. Yeah. Thank you. Thank you. Robert. I actually forgot to mention robberies. It would be a director of asset management in China. I think a similar, the finger right here and he used to, he loves the chair of the hedge fund community, so he does, he’s very, you know, he knows all the rules and the regulation of how has set up WFOE and as, as a management company in China. So if you like to set up his fun time. So yeah, I want to turn to with Dr. Wang. You’ll give us more macro perspective on policy aspect because we know the government policy, right? Regional, so important, more important in China’s markets and the wider opening novel. Is there any possibility where we, you know, reversal policies and you know, yeah, please.

Han Wang – Chief Economist, China Industrial Securities: 22:50

Alright. So it’s an honor to be here. So my name is Han Wang. I’m the chief economist of China Industrial Securities. We are a Shanghai based investment bank. And so since I’m the only macro guy, so I’ve taught more from a top down view I think the key words of this panel is opening up and also capital market. And so during my road shows many rodeos with scoring masters. Usually the questions are why opening up, why now, what’s different this time and why capital market. And so I would like to share a three observations you may find interesting. The first one is last October, October of 2018 China’s communist party have a quarterly meeting about economic situations. And the meeting is only attended by the political Bureau members, which are the highest ranked 25 members of the party.

Han Wang – Chief Economist, China Industrial Securities: 23:52

So for the first time, in 97 years of the party the world Capitol market appeared twice in the official statement after the meeting. And then only five years later in February of this year all these 25 members of the party get together, studied importance of the capital market of China. We haven’t seen that for, like I said, almost a century. The second observation is that in the March meeting, annually we have a March, a national Congress meeting. And so the premier of China in his entire report, there was one sentence saying that from now on, we need to keep the pace of monetary supply grows at the same pace as nominal GDP rose. Now let me rephrase that. When we talk about money supply, on one hand, it’s the asset of the banks, right? On the other hand, it means that we are sending out money lending money to private sectors.

Han Wang – Chief Economist, China Industrial Securities: 24:57

So when they say the money supply growth need to own par with normal GDP growth. That’s another way to say China. Want to look at the debt to GDP ratio? Just a fun fact. 10 years ago, if you look at the, the WIS number, China’s debt to GDP ratio was about 100 percentage point lower than the US level. What is now five percentage point higher than the US so that’s another interesting fact. The third one is if you look at all the statement within US trade war debate China has been using different types of tours. But there’s one scene that has been consistent over the last 12 months, which is that talking about opening up. And so you put all these three together, what does tells us, one is that the capital market is really, really important to China at this moment.

Han Wang – Chief Economist, China Industrial Securities: 25:58

And the second one is because the debt to GDP ratio is too high, they have to rely on the capital market and also they need to find a way to drive down funding cost for the outstanding debt. And the third one is while the US is still debating about whether we should decouple with China. China is using a different approach, which I would rephrase as a entanglement strategy. So just one interesting fact. Oh, so I got here yesterday and I just got my new Huawei phone a couple of weeks ago. And so I was trying to see what type of apps are available in the US and it surprised me that Uber doesn’t work on this new Huawei phone. Because it does, it says that you don’t have a Google play, so it’s not working. Just imagine what’s the cost for consumers.

Han Wang – Chief Economist, China Industrial Securities: 26:54

For me, I can get my 5G signal, you, Hong Kong, Shanghai, anywhere. So I want to keep that. On the other hand, when I got here, I want to take Uber and I have to pick between these two. So many speakers over the last two days have talked about decoupling, but I think China is taking a different approach, which is opening up. So now let me take one step back about why the capital market is so important. I mentioned that one is the debt to GDP ratio is too high. So do you need to rely as a financing channel, which is the capital market. The other one is because we have this huge debate between US and China about technology. So China need to boosting the domestic innovation in the tech sectors.

Han Wang – Chief Economist, China Industrial Securities: 27:44

Now, previously China’s business gross model was to rely on investment so you can get bank loans for home developers. It’s very difficult for startups to get bank loans from the banks. While on the other hand, you get cheap money from the capital market because that’s what the venture capital and private equity people are doing. So I think China is trying to solve the three problems, which is that’s racial innovation and US China trade war with one stone, which is opening up the capital market, emphasizing the importance of the capital market and also opening up as long as China is not as elated by the other countries, we are in a good position because even with the slower, you know assumption of China’s growth, China will be the biggest economy of the world. So just imagine 10 years later when we, once again, if we have a us China debate, China is much stronger economically and then obviously we will have a better advantage. But in order to achieve that, China cannot be blocked out by the overall market. And financial opening is probably the best strategy have. I guess that’s why my understanding is that this time is different. The opening up this is different and the capital market is different.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 29:02

Yeah. Thank you Han. Yeah. I, you know, my personal experience, there’s this time they’re doing things pretty fast. So you know, you, you highlight some of some good reasons for it and but the previous panel also, I mean, just, you know, when I walk in, I actually missed the previous panel, I want to walk in India and people telling me that it was pretty standard, was concerned by some risks, right? Investing in China and just happened. We actually we’re willing to talk about this as well. And Daju you can do you know, probably from his perspective, what do you see about the risks in investing in China and what a available tools or the hedge fund risks that hopefully there they are also trading. What are some additional tools they could use to hedge the risk.

Daju Gu – COO, tFOSE Group: 29:42

Okay. Well, thank you. I’m really honored to be here. I want to share with the audience some of the, my mentor observations or knows that draw a circle. Probably past five years, I’ve been traveled to China probably 30 times. So quite frequently dealt with a lot of institutions exchanges and regulators. And so I just want to share it with some of the my mental notes, first of all the, you know, everyone talk of a lot of a great potentials in different asset class, you know, bond market equity market the percentage for room for grows. But I would say, you know, just be cautiously optimistic and it’s not the money on the ground or you just go there, walk on the park and pick up and go.

Daju Gu – COO, tFOSE Group: 30:45

So ask all your colleagues how many of them are really, have a great time in terms of getting the return, right. So my point is I’m obviously all of us are made in China, right? So we spend a lot of time outside the country. We connected to the country very well, industry-wise, personalized, right? So first thing I want to say is the captain market in China are really at its infant stage and that’s why it’s very inefficient. Lot of opportunities. So first note from product point of view, it really lacks of the products that you come to use to here in the developed market. Right. a couple of examples. You know, you look at a futures market other than the Singapore A50 futures, are there any other tracking a sheer futures? None. Recently we talk about, you know, MCSI index is ready and the first one lineup waiting the hands waving is the Hong Kong stock exchange, right?

Daju Gu – COO, tFOSE Group: 31:53

So because of a recent sort of things happened in Hong Kong that kind of getting a little pause, right? So what I’m saying is the product is not really complete and far from it. Another example, CSI 300 index options. It’s six, seven years in making. And by the way, any product you want to list it, trade it, not only pass the central regulator, but also gives the state council, so it’s a long cycle. My point, you got to be patient, right? Another example, security landing a sector, it’s very, very inefficient at all. Anywhere who are trying to, looking for liquidity. You know, we’re talking about the lows, you know, all these ACO system are in the process being built and it may take quite a while, right? So caution number one, I would say you know, you really have a very strong enthusiam to go, but be clear, be realistic about the returns you expect over the next, you know, 12, 24 months.

Daju Gu – COO, tFOSE Group: 33:13

But I think in the market will reward you if you do have patience, right? This is the, one of the reasons we set up the exchange. You know, we are trying to provide the hedging tools, you know, that we see. So number one, number two, I would say there is a great need for the market education in China. I think all of you would agree with me particularly Robert, you there with the regulator on the routine basis. There’s a really misconception of what is really the rules of derivatives, right? If they think recent example, even sort of in here’s the fear of the regulator is 2015 market crash, right? People blaming, you know, index futures really dragged down, accelerated it, the market crash, you know, the truth and matter of facts probably in the, there is no conclusive sort.

Daju Gu – COO, tFOSE Group: 34:15

But the point is I think that there’s a really a need to really set the record straight. And what is the rule of derivative use? The financial derivative for the risk management. The purpose, right? So I think, you know, this is a, another my man mental nose. Third thing is you really need to be understanding the regulatory appetite. By that I mean the way the sequence, the pace, the regulator choose to introduce new product, new regulations, it’s really according to how comfortable they are rather than what you expect to or even the market need. So that was a, a regulatory appetite. The same time those of you who are really enthusiastic to go to invest, you need to do your homework. Do what is the regulatory landscape, which rule gums, which industry segments.

Daju Gu – COO, tFOSE Group: 35:21

Right? And you know, so you really need to have a clear map. And where are you going in terms of leveraging that may be the wrong words to do it, you know, to say, to participate, to develop the market of wire, getting an expected return. So we’re are you positioning there? Right. So we talk a lot of about the market access. So my point is perhaps seeking proper partners, local partners might be very helpful in helping you navigating the webs of regulations, relationships beyond just simply logistically set up the office.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 36:10

Yeah. Thank you. I, I think definitely there anyone who set up a operation and in a foreign country you kind of have to balance style the longer term prospect and the, you know, and make good money in the next year or two. So in particular China, I mean a lot of changes are structural changes that, I mean, that’s where the opportunities are. So what opportunity come, when it happens. You really make it 100% returns. I haven’t seen hedge funds doing that inside China after being China for five, six years. It’s actually being a cost center that has suddenly become profit standing for two or three years would make it a hundred percent richer because sort of the structural reforms happen. And so it’s not a suppose process by any means. And that you need to invest your time to invest resources to understand local markets.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 36:59

And I mean finding the word of social returns are and the so there, there’s a certainly a, a lot of learning to do, but I think the longer term you look at where SMN industry in China will be in five, 10 years, I think that’s a huge, huge explosive growth potential and we probably will recognize that. But, hopefully the government that will continue, you know, open the app and the, you know, establishing more tools and more, more instruments, more markets for everyone that, you know, that China’s market will become a much better one as well in, in the process. So, yeah. So yeah, we have about three minutes left. So maybe we should open up afloat open up to the question from the floor please. Okay.

Speaker 1: 37:45

So you say the time horizon is one to two years is unrealistic. You have to be patient. Then you also say that if you, if you hunker down and spend the time that you can have potentially a hundred percent return, but that sounds probably pretty good to a lot of people in this room. We don’t usually hear the triple digits. It’s pretty cool. Is there any in between we know that two Sigma is opening up a big office in Shanghai and obviously Bridgewater’s been there for a number of years and it seems like it’s the very biggest firms that have the staying power and the capital to do that. Is there an opportunity for more of a mid-size firm to do it and is there an in between, you know, losing a lot of money in a 100% return?

Thomas Fang – Head of China Equities & Global Markets, UBS AG: 38:36

There is the market is big enough for almost all players. And I think a CIO, a pension manager you try was, he wanted to share some ideas I think. So I would just quickly put like for as a locator other than the correlation advantage, you know, do a lot of market dislocation in China. You can particularly pick up, so for example, someone to pension we have written them our performance swabs or, or notes where you can actually participate into the onshore benchmark equity index with a guarantee performance of somewhere between five to 10%. So that makes asset locator, you know, very exciting in terms of not picking a manager’s or picking a stock that they would just launch that as a class with a guarantee performance. And as Mr. John mentioned, if you are hedge fund or even long manager manage investor, there’s what a hundred very high quality patch for and also allowing the manager in China. So they are very keen to beat your managers to work with a global pension and the investors. So those are the opportunities which is there are two and that if you are lonely or hedge fund managers as I mentioned, core managers has really deployed their strategies with different signals, a wisdom market apps and a retail participation. I think about the success ratio into China has been pretty high.

Robert Zhang – CEO, DH Fund Management & AMAC: 40:13

Another way market is that as a local manager has been growing bigger in the bigger, like a full 20 top 25 were market clear. I think more than half of them said, how was their Hong Kong office right now. The reason for them to do that is that for the local managers, the, you know, they’re not a Manny long-term capitals for from, you know, Chinese highlighter to highlight of LCD radios. Just like us and the other players, they like long-term investment from foreign market players, but the full local players, it’s very hard for them to know who a long-term investor from the United States is, Europe etc., I think as there’s opportunities. Thank you.

Bill Lu – Founder/CIO, Aspetuck Capital Management: 41:01

Yeah, so certainly I think my intepretation like if you’re a regular full in firms, you actually, I think you have some advantage of brand advantages inside China. You know, it’s because you coming from US or Europe or North America, the, the, where the compliance is probably more mature. The so invested in China do appreciate that. It’s not like the they don’t know the difference of some you know, what a manager’s doing here and a certain manager in China over there, they could it be having adequate disclosure and then taking excess risk. My manager here tend to be for a year, tend to have a much better practice. And that’s actually our, I had one teacher, so why are you going to try to, it’s not just the familiarity, so, okay, so you’re, but you’re coming for US, it has a track record. People in China actually look at you pretty favorably. So that’s my impression.

Daju Gu – COO, tFOSE Group: 42:00

I would just add it. You know, you want to really, if you are one of them going into the country, you definitely want to hide your intent and you know you want to make a few quick bucks and disappear, you know? So people probably not really show a very good the reception here.

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