‘This is the first funds arrangement between the (Mainland) China and HK, which is a major breakthrough for the financial market.’ The HK Financial Secretary, Mr Tsang.
The Hong Kong Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) have signed an agreement on Mainland-HK Mutual Recognition of Funds (MRF), which will allow eligible both places funds to be distributed in each other’s market through a streamlined vetting process, the scheme will be effective on 1 July.
This arrangement expands the distribution network for HK’s fund industry and attracts more China funds to domicile in HK, thus it boosts HK as a regional fund centre.
Offering a wider range of investment choices, the arrangement will cover about 100 Hong Kong-based and 850 mainland funds that has combined assets worth RMB 2.3 trillion.
The initial quota of HK$375.02 billion, which will enable funds domiciled in Hong Kong to be sold in the mainland and vice versa, is more than expected, Hong Kong Investment Funds Association chairman Bruno Lee Kam-wing said.
Lee said RMB 300 billion translates to about 60-70 percent growth in local fund sales, which amounted to HK$606 billion last year.
Lee believes mainland investors will be more interested at the initial stage in local funds with an H-share focus or regional mixed-assets type of funds. There are now 570 such funds which account for 15 percent of funds sold in the HKSAR.
The new program will help develop the local fund industry, as well as other professional service providers, such as accountants and law firms.
Lee also said he expects mainland fixed-income funds to become more popular among investors in Hong Kong, as there is a wider range of choice.