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May 23, 2015

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Cross-border investment door to open wider

A long-awaited program allowing cross-border sales of investment funds between the Chinese mainland and Hong Kong will be launched on July 1, the mainland’s securities regulator said yesterday.

The Mainland-Hong Kong Mutual Recognition of Funds program will allow funds domiciled in the mainland and Hong Kong to be sold in each other’s market as both sides take another step to boost cross-border investment after a stock trading link between Shanghai and Hong Kong opened last November.

The initial quota for the program will be 300 billion yuan (US$48.4 billion) in each direction, Deng Ge, a spokesman of the China Securities Regulatory Commission, said in the weekly media conference yesterday.

“This will diversify investment channels for mainland investors and also widen access for overseas funds to tap the mainland’s capital market,” Deng said.

Funds eligible for the program are subject to several conditions, including being established for more than one year and having a minimum fund size of 200 million yuan or its equivalent in a different currency, according to a statement posted yesterday on the website of the Securities and Futures Commission, Hong Kong’s securities regulator.

Around 100 Hong Kong and 850 mainland funds are eligible for the program, Deng said.

Hong Hao, chief China strategist at Bocom International, estimated that more than 2 trillion yuan of mainland funds will be eligible for the program with qualified Hong Kong funds valued at US$60 billion.

“For Hong Kong in particular, not only will this arrangement expand the distribution network for Hong Kong’s fund industry, but also attract more funds to domicile in Hong Kong, which will help build up Hong Kong’s fund manufacturing capabilities and develop it into a full-fledged fund service center,” John Tsang, the city’s financial secretary, said in a statement yesterday.

The program offers Hong Kong asset mangers options in the mainland’s fund market.

The program also offers opportunities for mainland asset managers to expand overseas and tap foreign investors.

“With the program, global managers need to reassess the threat from mainland mutual funds that offer more competitive returns,” research firm Z-Ben Advisors said earlier.




 

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