The Distillery: AMP's China play

Jotters are impressed by AMP's long-term strategy as it eyes Chinese profits, while one cautions the Coalition on budget challenges.

Cracking the Chinese market is not easy, as countless international firms have discovered, but AMP could finally be ready to do just that. A $15 million partnership with a long-time ally in the region is expected to be worth its weight in gold, as long as you have long-term vision.

The Australian’s John Durie explains why the new partnership with China Life will give AMP a profitable foothold in the burgeoning Chinese asset management industry, over a decade after it first tried its luck in the region.

“The China Life Asset Management joint venture is the first to get official approval in China, which is a great head start and AMP will own a 15 per cent stake in the joint venture. The minority position itself puts a cap on any immediate flow of funds AMP's way but the relationship holds the key and with AMP established at the beginning of the asset management industry in China, on paper at least it is set to reap big rewards. AMP itself was quick to play down talk of a boom, noting the joint venture was not expected to earn a profit for some three years. But it expects the Chinese mutual funds management to almost double between now and 2017. By that stage it will have $1.5 trillion in assets, which is what the Australian superannuation industry has under management today.”

Likewise, the Australian Financial Review’s Chanticleer columnist, Tony Boyd, sees reason for optimism looking out to the next decade – and little downside risk.

“(AMP Capital chief executive Stephen) Dunne could have gained immediate scale by buying a stake in an established fund manager. By coming in at the ground floor with a new joint venture company the only capital commitment is AMP’s share of the regulated capital… Dunne has taken a long term view. It may well be that the biggest upside from closer ties with China Life will be money flowing out of China into AMP funds rather than money flowing into funds managed by China Life AMP Capital Asset Management.”

The day of an interest rate decision, and surprisingly few jotters gave it more than a cursory glance. Instead, plenty of eyes are on the election.

The Age’s economics editor, Tim Colebatch, cautions on Liberal supporters popping the champagne bottles too early. Abbott isn’t Howard and the trickier issues he will confront have no easy fixes.

“This time next week, Tony Abbott will be prime minister, probably with a majority of more than 30 seats. For his supporters, it will feel like a return to normal after the chaos and disappointments of the Labor years. It will seem like the Howard government is back. They might be so lucky; sometimes the Liberals are. But the years ahead are unlikely to resemble the Howard years. The challenges are very different. The world will be far less supportive. Our economy needs new drivers of growth, our budget needs new revenues. Abbott is not John Howard. And he could find himself facing a very difficult Senate.”

The Australian’s Judith Sloan, meanwhile, suggests the focus on costings has got out of hand. The first question should always be: is it good policy?

“There is no doubt that the discussion of election costings has got completely out of hand. What we should be talking about is the substance of policies, before we start even considering the costs. We should also acknowledge that simply because a policy does not chew up cash does not make the policy worthwhile. Indeed, some of the most economically damaging policies use regulation, rather than spending, as their principal mechanism of delivery. When it comes to worthy-sounding regulations, my advice is to be afraid. They are the really costly ones.”

Moving to Billabong, which can’t escape the news as a private equity battle for its affections unfolds, and the Herald Sun’s Terry McCrann says the intervention of another player (Coastal Capital) only serves to bring Billabong and favoured suitor Altamont closer together, for the benefit of both. Fairfax’s Elizabeth Knight, on the other hand, takes the view that the added uncertainty is far from good news for the surfwear group. Time will tell.

Elsewhere, Fairfax’s Adele Ferguson discusses the competition watchdog’s concern with recent comments from Qantas boss Alan Joyce who flagged a ceasefire in the domestic discounting war last week.

And finally, the Future Fund has exceeded its mandated targets over a full financial year, receiving plaudits from Business Spectator’s Stephen Bartholomeusz and The Australian’s John Durie.

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