Emerging markets

Growth in assets under management will be higher in developing Asian markets, including the Chinese mainland, Indonesia, Malaysia and Thailand, than in mature markets such as Singapore, Hong Kong, Taiwan and South Korea, according to a recent study published by Fitch Ratings.

Emerging markets in Asia have a large and growing middle class population with low penetration of managed products at 5 percent of total financial assets on average compared with 15 percent in Western countries, the report said.

Despite the fact China has suffered from a five-year sluggish stock market and an under-developed debt market until recently, analysts believe that a stabilization or rise in equity markets and recent regulatory initiatives to expand Chinese capital markets will allow the gap to be closed during the next few years.

"East Asia represents a growth opportunity for international asset managers but distribution in the region is not straightforward," said Aymeric Poizot, managing director of Fitch's Fund and Asset Manager Rating Group.

"The cross-border wealth management and institutional segments are very competitive while, in retail, large consumer banks dominate distribution in most countries - making distribution agreements critical," said Poizot.

Historically, foreign funds have been distributed in Singapore, Hong Kong, South Korea and Taiwan, notably through private banks, wealth managers or financial advisers. As hubs, Hong Kong and Singapore account for $2 trillion of offshore funds' assets under management, largely consisting of European UCITS funds, the number of which has grown to reach around 6,000 funds in 2012.

China and South Korea dominate the $1 trillion domestic onshore market in East Asia but emerging Asia already accounts for 15 percent of the region's onshore assets under management and continues to grow fast.

"Domestic funds exhibit a bias toward core fixed income products and 2012 flows have continued to favor bond and money market funds. Multi-asset and internationally exposed funds are likely to attract growing flows in the coming years in Asia as in other regions because they offer more diversification," Poizot said.