MRF draws in Hong Kong asset managers

Added 13th July 2015

Hong Kong has received 14 applications for products wishing to take part in China’s mutual recognition of funds (MRF) since the scheme launched on July 1.

MRF draws in Hong Kong asset managers

On 2 July, the day after the launch, Hong Kong had received applications from eight Chinese mainland asset managers, a spokesperson from the Securities and Futures Commission (SFC) confirmed.

The scheme opens a new channel allowing Chinese asset managers to sell their funds to offshore investors.

On 9 July, the Hong Kong Monetary Authority (HKMA) unveiled an enhanced version of its CMU Service to ensure MRF is efficient and implemented effectively through “order routing and settlement support”.

Invesco, one of the first fund houses to apply for the scheme, welcomed its launch, calling it a “major milestone”.

However, the asset manager also said it does not expect the scheme to spark a dramatic increase in liquidity flows initially because of the initial investment quota of RMB300bn (£31.1bn, $48.4bn).

“Mutual recognition is profoundly beneficial to Hong Kong and Mainland China investors as well as the asset management industry”

Robust demand

“The scope of the scheme will likely expand over time,” it said. “We should also bear in mind that industry participants will need time to finalise the necessary distribution and marketing channels.”

Terry Pan, chief executive of Invesco’s Greater China, Singapore and Korea division, said: “Mutual recognition is profoundly beneficial to Hong Kong and mainland China investors as well as the asset management industry.”

“We have seen robust demand from Hong Kong investors for A-shares.”

This initiative was launched only days before China’s stock market began a sharp decline.

On 22 May, the SFC and the China Securities Regulatory Commission signed a memorandum of regulatory cooperation to provide a framework for the MRF initiative, as covered in Fund Selector Asia.

It follows the launch of the Hong Kong-Shanghai Stock Connect scheme, another initiative brought in by China as the country works to remove restrictions on its capital controls.

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