MRF northbound sales surge in August

Added 29th September 2016

Northbound net flows under the Mutual Recognition of Funds scheme hit RMB 3.95bn ($593m) in August, 3.6 times the figure in July (RMB 1.1bn), according to the latest data from the State Administration of Foreign Exchange.

MRF northbound sales surge in August

Sales growth has accelerated the past few months after the cross-border mutual fund sales link began in January. Five Hong Kong-domiciled funds are selling via the scheme.

“The latest figures are not a one-off event as fundraising has steadily built up over the five months the funds have been in distribution,” according to consultant Z-ben Advisors.

JP Morgan’s two funds, JPMorgan Asian Total Income Bond Fund and JPMorgan Pacific Securities Fund, have 94% of northbound market share as of June, according to Z-ben. The remaining marketshare goes to Hang Seng China H-Share Index Fund (4%) and Zeal Voyage China Fund (2%), which are both China focused.

The fifth fund, BOCHK All Weather China High Yield Bond Fund, started sales in the scheme last month.

JP Morgan’s success is attributed to a three-phase distribution strategy – foreign banks, domestic banks and online channels – with support by its onshore joint-venture CIFM Asset Management, Z-ben noted.

The figure highlights the strong desire of mainland investors to diversify assets offhsore, given concerns about the RMB.

“This trend has wider implications for the MRF program as a whole. In contrast to QDII, we are not seeing large new launches that get thinned once the sheen wears off,” Z-ben noted.

QDII mutual funds, which take overseas exposure by investing through assigned quota, saw a month-on-month 3% drop in assets to RMB 90.9bn in August. Still, a new QDII product by China Asset Management received “crazy demand” in July

Southbound flows also saw improvements in August, with net sales of RMB 15.4m. About two dozen mainland mutual funds are selling in the SAR through the scheme.

 Month   Northbound net sales (RMB m)   Southbound net sales (RMB m) 
 August   3,951  15.4
 July  1,109  6.3
 June  696  4.2
 Jan-Aug   7,828  81.8

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