Hong Kong keen on more RMB products

Added 23rd June 2016

Satisfied with the stock connect and MRF initiatives, the SFC now wants to bring in more complex China products, according the Hong Kong regulator's annual report.

Hong Kong keen on more RMB products

“New cross-boundary schemes such as the Stock Connect and the Mutual Recognition of Funds (MFR), are positive for market development, but bring with them challenges as well as opportunities,” according to Carlson Tong, chairman of the Securities and Futures Commission, who was quoted in the report.

“So far, the new cooperative arrangements put in place to support these schemes have functioned well. We therefore feel confident about expanding the breadth and depth of cross-border arrangements.”

The report, however, only once mentioned the long-delayed Shenzhen-Hong Kong Stock Connect, saying the SFC working with the CSRC on its launch.

Greater market integration is expected to help Hong Kong manage more complex China risks, for example by developing derivatives, futures and other instruments which help manage direct and indirect financial or market exposure to mainland investments, Ashley Alder, CEO of the SFC, who was quoted in the report.

"We keep an open mind to new proposals and reforms that promote market development."

Cross-border data

The MRF was launched in July 2015, which enables for the first time, eligible mainland and Hong Kong funds to be offered to the public in each market.

In December 2015, the SFC granted authorisation for the first batch of four mainland funds under the MRF scheme for public offering in Hong Kong whilst the China Securities Regulatory Commission approved the first batch of three Hong Kong funds for sale to the public in the mainland market.

As of June 2016, six Hong Kong (northbound) funds and 37 mainland funds (southbound) have been approved under the scheme.

For the first four months this year, the overall MFR northbound fund sales amounted to RMB1.36bn ($270m), which was significantly higher than the southbound flows. 

In the year ending March 2016, the SFC authorised four RQFII/Stock Connect unlisted funds and five RQFII/Stock Connect exchange-traded funds (ETFs), the annual report said.

The total number of authorised RQFII/Stock Connect unlisted funds and ETFs stood at 69 and 25 respectively, and the aggregate RQFII quota utilised by these funds amounted to RMB19.9bn ($3bn) as of the end of March 2016.

In the past year, the SFC authorised 80 unlisted structured investment products that can be denominated in renminbi, including a gold-linked deposit, or that can be linked to renminbi-denominated reference assets.

SFC-authorised RMB investment products

SFC-authorised RMB investment products  year-to-end-of-March 2016  year-to-end-of-March 2015
RQFII/Stock Connect unlisted funds 69 68
RQFII/Stock Connect ETFs 25 20
RMB offshore dim sum bonds/fixed income unlisted funds 17 15
RMB offshore dim sum bond ETFs 1 1
Recognised mainland funds under MRF 27 N/A
RMB gold ETFs 1 1
RMB real estate investment trusts 1 1
Paper gold schemes with RMB features 1 1
Unlisted structured investment products with RMB features 80 N/A

Source: Hong Kong's SFC

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