Another public equity is being sold off in a liquidation-style transfer.

Recently, the Beijing Property Exchange disclosed that China Foreign Economic and Trade Trust Co., Ltd. (hereinafter referred to as "Foreign Trade Trust"), the second-largest shareholder of Baoying Fund, is listing for transfer 25% of its equity. The listing disclosure period is from June 13, 2024, to July 10, 2024, with the listed price to be negotiated.

Currently, Baoying Fund is jointly held by China Railway Trust and Foreign Trade Trust, with respective holding ratios of 75% and 25%. This means that if the equity transfer by Foreign Trade Trust is completed, it will fully exit the list of shareholders of Baoying Fund.

Recently, under the "withdrawal order" background, the process of equity transfer of small and medium-sized fund companies has significantly accelerated. Prior to this, the equity transfer process of many small and medium-sized public funds was not smooth, with many companies experiencing multiple attempts such as auction failures, price reductions, and relisting.

Industry insiders analyzed to Yicai that behind the equity transfer of Baoying Fund, on the one hand, it reflects the development dilemma faced by small and medium-sized fund companies in the industry's stage of stock competition; on the other hand, it may be due to the shareholders' need to "return to the origin and focus on the main business."

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"Liquidation-style" transfer

Baoying Fund was established in May 2001 with a registered capital of 100 million RMB. Currently, the two shareholders of Baoying Fund are both trust companies, with China Railway Trust holding 75% and Foreign Trade Trust holding 25%.

Tianyancha shows that Foreign Trade Trust is a founding shareholder of Baoying Fund, and it has held the 25% equity since the establishment of Baoying Fund on May 18, 2001.

In the past three years, the investment income brought to Foreign Trade Trust by Baoying Fund has been declining year by year, with investment incomes of 35.6833 million yuan, 26.4251 million yuan, and 20.2685 million yuan for the years 2021 to 2023, respectively.

Unlike most equity transfers that have a "fixed price," the listed price for the equity transfer of Baoying Fund is shown as "negotiable."Listing information reveals that as of December 31, 2023, Baoying Fund's comprehensive asset management scale reached 137.821 billion yuan, of which the public fund asset management scale was 67.332 billion yuan, and the dedicated asset management scale was 69.594 billion yuan. Additionally, the subsidiary, China Railway Baoying Asset Management Co., Ltd., had an asset management scale of 0.895 billion yuan.

Public records indicate that in addition to holding a 25% stake in Baoying Fund, Foreign Trade Trust is also a founding shareholder of Nuoan Fund, currently holding a 40% equity stake in Nuoan Fund. Wind data shows that as of December 31, 2023, Nuoan Fund's public fund asset management scale was 175.194 billion yuan, ranking 34th in the industry.

Some industry insiders believe that the reduction in fund assets may simply be a need for shareholders to adjust their business, that is, to divest financial businesses unrelated to their main business.

Current situation of small and medium fund equity transfers: auction failures, price adjustments

In recent years, there has been an increase in the transfer of equity in public fund companies, most of which are equities of small and medium-sized fund companies. However, the transfer process for many small and medium-sized public fund equities has not been smooth.

Among them, there are quite a few trust companies transferring public fund company equities. According to incomplete statistics, since 2022, at least Shandong Trust, Shanghai Trust, Chongqing Trust, Shanxi Trust, Guoyuan Trust, and AVIC Trust have put up for sale the fund company equities they hold. Among them, Guoyuan Trust's 31% equity in Jinxin Fund, Shanxi Trust's 31% equity in HSBC Jinsun, and AVIC Trust's 27.27% equity in Jiahe Fund are still seeking buyers.

Previously, on June 12, it was reported that Shanxi Trust, the largest shareholder of HSBC Jinsun Fund Management Company, had reached an agreement with HSBC Global Asset Management (UK) Co., Ltd. (hereinafter referred to as "HSBC Global") to transfer its 31% equity in HSBC Jinsun Fund. HSBC Global will pay about 1 billion yuan (approximately 138 million US dollars), and after this increase in equity, HSBC Global's shareholding will increase to 80%. However, this transaction still requires approval from the regulatory authorities.

In May, the Beijing Property Exchange announced the transfer plan of 81.818 million shares of Jiahe Fund Management Co., Ltd., and AVIC Trust intends to carry out this transfer based on the company's strategic adjustment. The public notice period was from May 13 to November 1. This is not the first time Jiahe Fund has sought a change in equity. Since December 2022, AVIC Trust has made multiple attempts to transfer Jiahe Fund equity, but none have been successful.

There is also the case of Anxin Fund, whose shareholder China Guangdong Nuclear Finance Co., Ltd. has not attracted a buyer since it first listed the equity at the end of June 2023, after adjustments such as price reduction and extension. In the first half of this year, it continued to extend the listing transfer period for the fund equity it holds.

A similar situation occurred with Shanghai Bank's fund. In March 2023, Shanghai Bank planned to transfer 20% of the equity of Shanghai Bank Fund at a base price of 338.8 million yuan. After three extensions, on May 8, the China Securities Regulatory Commission announced that the application materials for the change of more than 5% equity of Shanghai Bank Fund were received by the regulator, but the buyer has not been disclosed.Industry insiders also mentioned that companies often make financial investments in small and medium-sized financial institutions, but due to the transformation pressures and development bottlenecks faced by the investment targets, industry valuations tend to decline. Recently, there has been a noticeable increase in news about the transfer of equity in small and medium-sized financial institutions, and the "withdrawal of gold order" may indirectly accelerate this process.

On June 3, the Party Committee of the State-owned Assets Supervision and Administration Commission (SASAC) held an expanded meeting, pointing out the need to thoroughly implement the "Regulations on Accountability for Preventing and Resolving Financial Risks (Trial)", and to strictly control the increase in quantity. In principle, all central enterprises are not allowed to establish new, acquire, or newly participate in various financial institutions. Financial institutions with smaller effects on the main business and greater risk spillover effects are not allowed to participate in shares or increase holdings. In fact, since 2019, the SASAC has required all central enterprises to strictly control the proportion and direction of non-main business investments, and to accelerate the divestment of non-main and non-advantageous businesses, with "de-financialization" gradually becoming a trend.

Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, believes that withdrawing from some financial equity with small contributions to the main business of central enterprises and a greater potential risk spillover impact can allow central enterprises to focus on their own business, refine their main business, enhance innovation capabilities and market competitiveness, and also help to reduce potential financial risks.

Shuai Guorang, a researcher at Trust Research, also believes that the main reasons for trust companies to transfer and divest financial institution equity may be twofold: on the one hand, to focus on the main business and return to the origin; on the other hand, the decline in profitability of some small and medium-sized financial institutions, and the transfer of equity based on prudent consideration.