Alibaba Enters Wealth Management Sector

Alibaba Enters Wealth Management Sector

Chinese Internet Company’s Alipay Affiliate to Launch Fixed-Term Investment Product Friday

Updated Feb. 11, 2014 1:50 a.m. ET

Alibaba Group Holding Ltd.’s online-payment affiliate is set to roll out its first wealth management product Friday, as Chinese Internet companies move deeper into financial services.

The affiliate, Alipay, this week began allowing users of its Yu’E Bao investment service the right to put their money into the wealth management product when it launches. In China, wealth management products are deposit-like investments offering higher returns for a fixed period than banks offer on a typical savings account.

Alipay said it would offer investors an annualized return of 7%, while their principal also will be guaranteed. The product will have a maturity of one year. As of Tuesday, more than 1.4 million users had made reservations for the coming investment product, according to Alipay.

Alipay, owned by Alibaba Small & Micro Financial Services, processes payments for Alibaba’s Tmall and Taobao shopping sites.

The latest product marks the continuing proliferation and evolution of financial services offered by China’s large Internet companies. In June, Alibaba began offering Yu’e Bao, a money-market-like fund that allows investors to withdraw money instantly. China’s Tencent Holdings Ltd. 0700.HK -0.66% and Baidu Inc. BIDU +1.92% have since launched similar products.

Yu’E Bao and its rivals present a challenge to China’s banking industry. The one-year benchmark deposit rate set by China’s central bank now stands at 3%, meaning banks can offer depositors a maximum rate of 3.3% for one-year time deposits under government rules.

China’s financial sector has long been dominated by state-owned banks, but technology companies have begun to enter their turf by using online platforms to push innovations in the sector. Alibaba launched its Yu’e Bao in June and had attracted more than 49 million customers with more than $40 billion in investment as of Jan. 15.

Alipay’s wealth management product will be invested in a universal insurance product offered by Pearl River Life Insurance Co., an insurer based in China’s southern Guangzhou city. The product is expected to pool 300 million yuan ($49.5 million), which will be invested in bank deposits, property sector and equities and funds, according to the insurer’s customer service hotline.

The minimum investment is 1,000 yuan a person and each investor’s maximum contribution is capped at two million yuan, according to Alipay.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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