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JPMorgan (JPM) Remains Positive About Growth Potential in China

JPMorgan’s JPM asset management business, J.P. Morgan Asset Management, will continue with its hiring plans in China as the Wall Street bank seeks growth in the world’s second-largest economy.

Desiree Wang, chief executive officer of J.P. Morgan Asset Management China, stated, “China’s mutual fund industry remains an irreplaceable growth market for global asset managers. It offers a great certainty of growth.”

J.P. Morgan Asset Management has been operating in China for almost 20 years now. Based in Shanghai, it provides more than 90 mutual fund products, including equities, fixed income and outbound investments.

After China’s $53-trillion financial markets became open to foreign firms following the removal of restrictions on ownership, various firms either applied to form joint ventures in China or gain greater control of their already established joint ventures in the country.

Last year, JPM gained full control of its China mutual fund joint venture, following the buyout of its local partners. Also, JPM has bought a stake in China Merchants Bank Co.’s wealth-management subsidiary for 2.67 billion yuan.

China Merchants Bank, known as the nation’s king of retail banking, was the first financial company in China to have allowed a foreign firm to make a strategic investment in its wealth management subsidiary.

Since the banking giant wants to keep its headcount in China largely the same throughout the year, Wang said, “The company has no major downsizing plan for the asset management business” in the country.

Over the past six months, shares of JPMorgan have rallied 28.6% compared with 26.3% growth of the industry.

 

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At present, JPM carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

China’s Current Economic Scenario

While JPMorgan remains optimistic about the prospects of China, firms like Morgan Stanley MS have axed 9% of its employees at its asset management unit in China. This is part of MS’s broader plans to stay defensive amid the nation’s economic slowdown and market uncertainties.

China’s prolonged economic sickness has resulted in a collapse of its stock markets, which has diminished prospects for its $3.8-trillion fund sector.

Last month, the benchmark CSI 300 index, which replicates the top 300 stocks traded on the Shanghai and Shenzhen exchanges, fell to five-year lows after sinking 11% in 2023. The China stock markets have been hit by the unparalleled debt crisis in the property sector and a lack of large-scale government stimulus.

Thus, the staff reduction is part of Morgan Stanley Investment Management China’s efforts to modify and revise the business after taking full ownership.

Similarly, various other investors are pulling back billions of dollars from China’s actively managed equities funds.

In October 2023, Citigroup C announced that it agreed to sell its China-based onshore consumer wealth portfolio to HSBC Holdings plc. As a result of the sale, Citigroup will transfer assets under management and deposits worth $3.6 billion to HSBC Bank China.

Though Citigroup has planned to exit its consumer wealth business in China, it will retain its institutional businesses, wherein it has a preeminent position. It will continue to cater to the needs of ultra-high-net-worth clients of China via its regional wealth centers in Singapore and Hong Kong through its International Personal Bank and Citigroup’s Private Bank operations.

Signs of Recovery?

Of late, the sentiment in the nation’s stock market has improved a bit since Beijing took measures to support the market and address the underlying economic issues. It has sought to put a floor under the share prices by pushing state-controlled funds to buy stocks, curbing short-selling and trading misbehaviors.

While the stimulus might result in some growth in China’s economy, a full stock market recovery requires a more forceful response to the property crisis.

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