Asia has definitely become a Promised Land for many funds managers, looking to tap into an impressive but still immature pool of wealth. The message has been positively received on the East side with countries gradually opening up to global markets. But does this openness necessary match with easygoing business? Whereas some aspects are clearly aimed at offering an easy and integrated framework to develop business, constraints are also emerging.


 Hong Kong Stock Connect

Inaugurated on November 17, 2014, the initiative was well acclaimed by the international investment sector. Following with the success of RQFII and DQFII programs, the Connect scheme provides additional flexibility and potential to dig into Mainland China’s market. The relative success of the launch should however be considered carefully as current investment restrictions may induce a potential slow down in activity. Notwithstanding the latter, the scheme presents huge potential and will definitely help to strengthen China’s capital markets positioning and RMB internationalisation.

ASEAN Fund passport

In September 2014, financial regulators from Singapore, Malaysia and Thailand launched the ASEAN Collective Investment Scheme (CIS) Framework. The framework allows the units of an ASEAN CIS authorized in its home jurisdiction to be offered in the other host ASEAN jurisdiction, provided that the CIS satisfies a set of specified standards. This cross-border distribution platform  represents a huge potential for fund managers willing to tackle regional but less structured markets such as Malaysia and Thailand. Very positive and promising, this scheme requires though registering funds in one of the participating country. Singapore is therefore aimed at becoming a place of choice for fund managers willing to develop in South East Asia.

AEC – ASEAN Economic Region

With 10 participating countries, the much-anticipated ASEAN Economic Community is an ambitious project that, if brought to life will represent a significant growth potential for the region. Aimed at creating a full regional economic integration, the project is still under discussion and expected to be launched by end of 2015. Despite the skepticism surrounding the project’s feasibility in due date, one must acknowledge that there is an actual willingness of building up a regional framework. While it took about half a century to Europe, one can reasonably estimate that Asia will, once more time, show the world that they can promptly catch up.


Faced with an unprecedented interest as part of international players, Hong Kong and Singapore have been gradually enhancing local regulation so as to:

  1. Align with international standards and
  2. Gradually operate a “positive discrimination” towards institutions wiling to develop to the region.

Compliance and regulatory constraints have been mounting these last years, especially on the private banking and Wealth Management sectors. Regulatory bodies are now gradually tightening the rules framing the distribution of foreign Collective Investment Funds. Below is a summary of current distribution rules for offshore funds willing to be distributed to institutionals and accredited investors only. One should however keep in mind that such rules will keep evolving and induce higher costs for institutions.


While distribution to Institutionals does not require any registration, the offering of funds to accredited investors requires to be registered under the “restricted scheme” (section 305 – Securities and Futures Act).

But what is an accredited Investor as per MAS regulation?

As per MAS (Monetary Authority of Singapore) guidelines, an accredited investor is:

  • an individual whose net personal assets exceed SGD 2M (about USD1.5M) or whose income in the preceding 12 months is not less than SGD 300,000 (about USD230,000).
  • A corporation with net assets exceeding SGD10M (USD7.6M) in value as determined by its most recent audited balance sheet.

Potential changes

The MAS is currently evaluating the possibility of giving choice to investors to make a personal choice whether to be considered as “accredited investor”. This comes certainly with the objective of avoiding too much marketing towards accredited investors because offering to them is not as restrictive as offering towards public investors. If the change is confirmed, any accredited investor will become “public” (unless otherwise elected). This would accordingly prompt foreign funds to properly register and get licensed in Singapore.

How to register?

Registration is relatively straightforward and can be processed directly through the MAS online portal (CISNet).

Whereas no prospectus was previously required, it is now mandatory to attach to the registration file an Information memorandum. Fund Managers can actually use their existing offering documents, provided they satisfy Singapore regulation.


Offshore funds aimed at being offered to “Professional Investors” only do not require previous authorization and registration with the Hong Kong Securities and Futures Commission (SFC).

What is a “Professional Investor” as per SFC regulation?

Professional investors gather altogher the institutional investors (banks, insurance companies, brokers, investment managers, etc.) and accredited investors.

…. And an accredited investor?

As per SFC regulation, accredited investors are corporations with at least HK$40M (about USD5M) in assets and individuals or corporations with investment portfolios of at least HK8M (about USD1M). Contrary to Singapore, fund managers in Hong Kong have to provide the necessary documentation (statements) so as to certify that the accredited investor truly qualifies as a professional investor.

Potential changes

Although no formal guidance has been published yet, the SFC recently indicated (informally) that they may adopt a more restrictive position and treat marketing to professional investors as marketing to public, therefore forcing managers to properly register and license funds on the HKG Stock Market.

Asia will definitely remain a predominant market where it makes absolute sense to develop a presence. However and considering the current mounting regulatory constraints, there will be a need sooner or later to show increased commitment and, to a certain extent, setup locally. Whereas this will induce short-term costs, related opportunities of development will largely compensate  medium-long term growth potential.


The current global outlook is definitely unstable and places investors in a relative uncertainty over where they should allocate their investments. Among this “gloomy” and very volatile situation, Asia definitely remains one of the only emerging regional market that still benefits from a positive level of confidence as part of international investors and economists. I recently attended a conference organized by the French Chamber of Commerce on current economic trends in Asia. Mr Manu Baskharan (Centennial Asia Advisors) and Antoine Chery, chief of the French Economic Service for Asean were the speakers of this much attended event.

Below is a summary of the main points addressed during the conference:

CHINA: Following an impressive decade of rocketing growth rates, China is definitely entering into a much slower pace of growth. This should not be such a matter of concerns except that historical growth was artifically fuelled by heavy investments, creating by itself a vicious circle. Recent incidents raised fears of a potential brutal landing but the country is still on tracks. As the chinese government is gradually experimenting a shift towards a more sustainable growth (consumer oriented), it is expected that episodic shocks will happen but no collapse.

INDIA: definitely poised to rebound. The fall in crude prices comes to a very oportune time and should help tame the inflation, improve current account deficit and provide a conducive environment for investments. Risks are not alienated though and Modi’s islamophobia culture still represents a true issue that could lead to political divisions.

INDONESIA: Stabilizing but still fragile. Infrastructure, business environment and productivity improvements are the key issues that the government must tackle. Current account deficit remains however the biggest risk to a country that needs such important structural changes. Reforms are on tracks and provided so far a positive sentiment to markets. If proved efficient and well managed the country shall meet up again with min 6% growth rates.

THAILAND: The country is somewhat stabilizing but outlook remains unstable. Political risk is very high in near term and could hamper the government’s recent stimulus measures and country’s exports revival

MALAYSIA: Making a comeback, the country’s outlook is positive in the short-term but more uncertain over the long-term. Structural improvements shall boost Foreign Direct investment but domestic headwinds may hamper this positive outlook (subsidies cut, declining consumer confidence, impending GST implementation).

PHILIPPINES: The situation is one of the best ever experienced in decades. Growth prospects are robust, private and public investments are rising, foreign investors are increasing their presence in the country and a peace deal with muslims rebels in Mindanao was finally signed. But politics definitely remain a worry. Next elections are already in 2 years.

VIETNAM: The country has somewhat overcome the worst, fixing some financial imbalances but the situation remains risky. Growth prospects are hampered by slow credit growth, continued closure of domestic firms and structural problems in banks and state-owned entreprises

HONG KONG : Resilient economy that will definitely benefit of China’s opening, making Hong-Kong the key gateway to Mainland China. Recent protests have definitely raised political damages but all in all long term prospects are positive.

TAIWAN: Relatively positive long term growth prospects thanks to US recovery.

KOREA: positive prospects supported by the US recovery, record foreign direct investments. Drop in oil prices has a double edged impact: It could boost country’s growth but at the same time negatively impact exports if it turns out to be caused by slower demand in China.

JAPAN: Opinions are quite ambivalent. There is a political will for fundamental changes but the country is still struggling to regain momentum as its population declines and ages.

SINGAPORE: Despite domestic headwinds and slower growth prospects, Singapore will be a huge winner of current ASEAN regional integration process. Business friendly environment and positive growth prospects in the region are turning Singapore in one of the key hub to radiate in South East Asia.

All in all, prospects are positive for ASIA but many headwinds could induce punctual downward shock in the short-term. Besides this relative positive sentiment vis-a vis Asia, time is definitely for caution as global environment is clearly gloomy with many uncertainties and fears arising from tensions in Middle-East, Fed rates rise, Europe sluggish growth. Where this could be seen as a difficult scenario for investments, one should remind that this is the perfect opportunity to closely follow those countries that definitely benefit from strong fundamentals allowing them to strongly rebound when clouds move away…though not in the short-term.