Banking Crisis

Real Estate Woes Spell End Of Hywin's Chinese Wealth Adventure; Certain Businesses Unchanged

Tom Burroughes Group Editor 4 July 2024

Real Estate Woes Spell End Of Hywin's Chinese Wealth Adventure; Certain Businesses Unchanged

A China-based wealth and asset management business, Hywin has pulled out of these areas – with some exceptions. Hwyin Holdings has announced that it is leaving the mainland China wealth sector and switching to techology following a slump in its shares. The firm was hit by exposure to China's embattled real estate space.

The problems engulfing China’s debt-laden property development group Evergrande have hit Hywin Holdings, a US-listed business. At the end of June, it announced that it was quitting the wealth management and asset management business and pivoting to the tech sector instead.

Hywin's ties to the Evergrande property group surfaced as a significant issue last year, reports had said. Despite attempts to resolve the issues, shares on the Nasdaq in Hywin Holdings haven’t recovered. Over the past 12 months, they have been almost wiped out, collapsing more than 95 per cent. 

In a statement on 28 June, Hywin said it intends to leave the wealth and asset management business, focus on technology instead, and change its name to Santech Holdings Limited. The wealth business was founded in 2006 and has more than 2,500 employees.

When this publication contacted Hywin for comment, it replied that some of its business entities, such as those in Hong Kong, are not affected.

Hywin International (including “Hywin Asset Management (Hong Kong) Limited” and “Hywin International Insurance Broker Limited”) has no change in strategy or ongoing business, it said. "We will continue to build on our market leadership in EAM, alternatives funds, index investing, fiduciary services, and insurance solutions," it said.

In its 28 June statement, Hywin Holdings said: “The company has decided to cease its wealth management and asset management businesses by terminating the contractual arrangements with Hywin Wealth Management Co, a variable interest entity in China currently controlled by Hywin Enterprise Management Consulting (Shanghai) Co, a wholly owned subsidiary of the company. Following such termination, Hywin Wealth Management will cease to be a consolidated entity of the company. Hywin Wealth Management will be owned and controlled by Mr Han Hongwei, who has indicated that he will continue to lead Hywin Wealth Management and will remain fully committed to resolve ongoing redemption issues for its affected Chinese clients.”

At one point, Hywin was China’s largest provider of real estate wealth management products. Last December, it had pledged to set up a special group to address problems such as delayed payments on some of the projects it had offered. The matters showed how China’s property crisis, highlighted by defaults by developers such as Evergrande, has rippled across the financial sector. 

In September last year, Hywin Holdings reported that the number of wealth management clients rose by 8.2 per cent to 152,607 as of 30 June from a year earlier. For its financial year ended 30 June, it said revenues rose 7.7 per cent to RMB2.091 billion ($301.3 million) from a year earlier. For the six months ended 30 June, revenues slipped 0.5 per cent to RMB1.055 billion. Hywin was also a prominent entrant into the “health management” space. In August 2022 it took a controlling stake in Life Infinity as part of a push into the country’s health management sector.

In 2021, Liechtenstein-based VP Bank and its sister businesses signed a cooperation pact with Hywin Wealth Management and associated entities to build an offshore platform pitched at wealthy Chinese clients. In December last year, VP Bank reportedly said it did not distribute Hywin’s real estate products to its clients.

Tech pivot
In its 28 June statement, Hywin said it wants to “seek new, innovative opportunities in the technology sector, including, among others, new retail, social e-commerce, and metaverse industries.”

“The company may seek to expand into the technology sector organically by incubating new technology models, or by forming strategic partnerships with third parties, or both,” it said. 

Referring to its health management business, Hywin said it will “further assess its remaining assets and operations in its health management services and may consider alternatives with respect to such assets and operations.”

In 2022, Evergrande defaulted on its dollar bonds. Ratings agencies had raised the red flag about its financial state late in 2021.

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