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FIA Asia Derivatives Conference “Doing business in China” Perspectives of Man Financial Mr. Simon Raybould Chief Executive Officer Man Financial Hong Kong Beijing August 2005.

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Presentation Transcript
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FIA Asia Derivatives Conference

“Doing business in China”

Perspectives of Man Financial

Mr. Simon Raybould

Chief Executive Officer

Man Financial Hong Kong

Beijing August 2005

slide2

This report is issued by Man Financial Limited, which is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange. Man Financial Limited is a member of the Man Group. References to "MFL" in this report shall mean Man Financial Limited unless otherwise stated. The report was prepared and distributed by MFL for information purposes only. The report contains information and opinions, which may be used as the basis for trading undertaken by MFL and its officers, employees and associated companies. The report should not be construed as solicitation nor as offering advice for the purposes of the purchase or sale of any security, investment or derivative. The information and opinions contained in the Report were considered by MFL to be valid when published. The report also contains information provided to MFL by third parties. The source of such information will usually be disclosed in the report. Whilst MFL has taken all reasonable steps to ensure this information is correct, Man Financial Limited does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at their own risk and Man Financial Limited does not accept any liability as a result. Securities and derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Foreign exchange, Exchange TradedProducts and over the counter Derivatives are only available to intermediate customers and market counterparties, as defined under the rules of the Financial Services Authority. Regardless of the account type you choose, there are risks inherent in trading, including the risk of loss greater than the original investment. The opportunity for profits creates a corresponding risk of loss. Man Financial Ltd has approved this advertisement for the purpose of section 21 of Financial Services and Markets Act 2000. MFL is authorised and regulated by the Financial Services Authority.

slide3

“Doing business in China”

  • Man Financial: profile & business flows
  • Perspective on the state of the Mainland Marketplace
  • What are Man Financial’s strategic goals with regard to China?
slide4

Man Financial: profile & business flows

Man Group, plcFocused on Exchange Traded Business

MF offices: London, New York, Chicago, Paris,

Taipei, Singapore, Sydney

slide5

Man Financial: profile & business flows

Man Financial – Exchange rankings as at March 2005

slide6

Man Financial: profile & business flows

  • Man Metals
  • 17 percent of market share on London Metal Exchange
  • China business flows built upon end user hedging requirements

Man Market Share

*Man side of every “RT” trade

2004 broker rankings international survey of corporate risk managers

Man Financial: profile & business flows

2004 Broker Rankingsinternational survey of corporate risk managers

# BASE METALS RANKINGS: 9

  • Cash (Man Financial #1)
  • Forwards (Man Financial #1)
  • Options (Man Financial #1)
  • Cash (Man Financial #1)
  • Forwards (Man Financial #2)
  • Options (Man Financial #1)
  • Cash (Man Financial #1)
  • Forwards (Man Financial #1)
  • Options (Man Financial #1)

COPPER

ALUMINUM

OTHER BASE METALS

slide8

State of the Mainland Marketplace

  • State of Mainland Marketplace
  • Strategic Relationships:
  • Joint Ventures & acquisitions
  • Closer Economic Partnership Agreement (CEPA)
  • Recent Structural changes:
  • Access to Mainland Futures planned for Foreign Investors
  • QFII quota increased
  • Mainland futures brokers to trade international futures
  • State of the Mainland Securities business:
  • State of Mainland Securities Brokerage Industry
slide9

State of the Mainland Marketplace

  • Access to Mainland Futures planned for Foreign Investors
  • Plans to allow QFIIs to trade domestic futures market.
  • Yang Maijun, director of CSRC Futures Supervision Dept:
    • “China’s futures market is short of big institutional players”
    • “Development of the market hasn’t caught up with investor’s demand”
  • Currently there are 11 Mainland futures contracts covering agriculture products, fuel oil and metals, with plans to approve contracts for sugar and steel wire.
    • Yang Maijun: CSRC would make agricultural and strategic resource commodities a priority for developing new future products.
  • Bloomberg 30 May 2005
  • China Economic Review July 2005
slide10

State of the Mainland Marketplace

  • QFII Quota increased
  • Investment quota scheme on the amount invested by global money managers in Yuan denominated securities (ie A shares & bonds)
  • Total QFII quota amount to increase from $4bn (less than 1% of total market cap) to $10bn.
  • Data suggests almost one-third of foreign investors’ QFII allocations are being kept in cash.
  • Source: Xinhua News Agency 13 July 2005 & Asiamoney, 1 April 2005
slide11

State of the Mainland Marketplace

  • Mainland futures brokers to trade international futures
  • Pilot program approved by State Council
  • Mainland futures brokerage firms to trade overseas futures on behalf of local mainland firms.
  • Previously, only selected state-owned firms permitted to hedge physical requirements.
  • AWSJ 17 June 2005
slide12

State of the Mainland Marketplace

  • State of the Mainland Securities Brokerage Industry
  • Approx 120 brokerages – majority of income is trading fees
  • Brokerage Industry lost 15bn Yuan last year
  • State media have reported a 45 percent drop in revenue for Chinese brokerages during the first half of 2005:
    • Mainland brokerages combined revenue: 9.57bn Yuan (vs 17.47bn first half 04).
    • Securities houses collected 8.3bn Yuan in brokerage (vs 15.26bn first half 04)
    • Revenue from Underwriting 345m Yuan (vs 829m first half 04)
  • Many Mainland brokerages have applied to PBOC for bailout loans. PBOC have said 10bn Yuan in cheap financing available for better performers.
  • CSRC spokesman: (SCMP 28 July 2005)
    • hard to predict how many more of China’s approximately 120 remaining brokerages would be shut down
    • hinted that more closures were expected
    • “One-hundred-and-twenty brokerages is more than the market needs”
  • SCMP: 2 July 2005 & 19 July 2005 & 28 July 2005, China Economic Review July 2005
slide13

Man Financial Perspective

  • Required developments from the perspective of Man Financial:
  • FX
  • Banking procedures
  • Corporate Governance
  • Bond Market
  • Money Market
slide14

Man Financial Perspective

  • Man Financial values building relationships with:
  • Regulators
    • People’s Bank of China (PBOC)
    • State Administration of Foreign Exchange (SAFE)
    • China Securities Regulatory Commission (CSRC)
    • China Banking Regulatory Commission (CBRC)
  • Exchanges
    • Shanghai Futures Exchange
    • Dalian Commodity Exchange
    • Zhengzhou Commodity Exchange
    • Shanghai Stock Exchange
    • Shenzhen Stock Exchange
slide15

Man Financial Perspective

  • Differing Customer Profiles:
  • Man Financial
  • China
  • Need for Education
  • Understandingthe cash markets
  • Transparency
slide16

China Mission Statement

  • Continue to expand legitimate institutional customer base on the Mainland.
  • Build links with Mainland brokers.
  • Push for access to Chinese product base for our own international customer base.
  • Be part of the educational process and development of the Chinese derivative markets.

www.manfinancial.com

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