SFC hatching rules to lure more funds to city
The Securities and Futures Commission is working with the government on proposed changes to the law to lure more funds to the city, according to SFC chairman Carlson Tong Ka-shing.
Financial Secretary John Tsang Chun-wah said in his budget speech on Wednesday that the government would propose changes to extend profits tax exemptions to offshore private equity funds. He also planned changes to allow Hong Kong funds to set up as open-ended investment companies instead of as trusts, as required under existing rules.
"These two changes in the law would help boost Hong Kong's fund industry," Tong said. "Many fund companies consider it too troublesome to set up funds as trusts. If they could be set up as a company, it would attract more funds to domicile in Hong Kong."
Of the 1,700 or so authorised funds in the city, only about 300 were Hong Kong-domiciled, partly due to structural and tax issues. Most funds sold in Hong Kong are registered in Dublin or Luxembourg.
"Many funds are domiciled in Europe, which they use as an administrative base for fund products. Hong Kong is used more as an office for sales and marketing," Tong said. "The new proposals might encourage them to use Hong Kong as a fund administration centre."
Tong said the SFC and the government were working with the mainland authorities on a mutual recognition deal to let Hong Kong-domiciled funds to be sold on the mainland and mainland funds sold in Hong Kong. Not all funds could be included in the deal at first because some funds sold in Hong Kong might be considered "too risky" for mainland investors. So selected funds would be identified.
"This is not easy as we would need to identify funds suitable to be sold to both Hong Kong and mainland investors," Tong said.
Mark Konyn, chief executive of Cathay Conning Asset Management, said mutual recognition of funds would be a major step for the sector in Hong Kong and the mainland. "It potentially gives Hong Kong-based funds an advantage over other internationally organised funds when accessing Chinese investors, and at the same time it could strengthen Hong Kong's position as a gateway to international capital for China," Konyn said.