New | Big boost in Hong Kong fund sales tipped under link with mainland China
Hong Kong mutual fund sales could jump significantly thanks to Beijing’s “generous” and higher than expected 600 billion yuan (HK$760 billion) quota for the cross-border fund sales scheme, the chief of the fund industry body says.
Beijing set the total quota for the scheme at 600 billion yuan, or 300 billion yuan each way for mutual funds set up for more than a year with assets of at least 200 million yuan.
Hong Kong Investment Funds Association chairman Bruno Lee Kam-wing said the 300 billion yuan quota for Hong Kong-domiciled funds to be sold on the mainland equates to 62 per cent of Hong Kong’s mutual fund sales of US$77 billion last year. This provides plenty of scope for new sales under this quota, Lee said
“The quota is very generous and is much higher than most fund managers expected,” Lee told the South China Morning Post on Monday. “This shows Beijing is really keen on its capital market reform and wants to attract international funds to sell their products.”
Regulators from Hong Kong and mainland China on Friday signed up to the long-awaited mutual recognition programme for cross-border fund sales. The scheme will be launched on July 1, after having first been floated in 2013.
“The quota is equal to the assets under management of the 100 Hong Kong-domiciled funds that are qualified to be cross sold north in the mainland, which means the mainland authorities are open to all these funds being sold on the mainland,” he said. “Most of our members who are international fund houses have expressed strong interest to sell their products to the mainland, with its market of 1.3 billion people.”
Since only Hong Kong-domiciled funds would be allowed to be sold under the scheme on the mainland, he said many international fund houses had been setting up funds in the city. This has resulted in a doubling in the number of such funds to about 570 over the past few years.
The quota is equal to the assets under management of the 100 Hong Kong-domiciled funds that are qualified to be cross sold north in the mainland
Industry giants such as BlackRock, Schroders, Invesco and Baring have expressed interest in selling their Hong Kong-domiciled funds on the mainland.
“Hong Kong, however, will still find it hard to compete with international fund domiciled centres such as Luxembourg or Dublin as the funds set up in these centres would be sold in Europe and other Asian countries, while the funds domiciled in Hong Kong would only be allowed to be sold in Hong Kong and mainland China,” Lee said.
He said the funds to be sold northbound would mainly be global or regional stock and bond products, while few would focus only on the Hong Kong market.
The 850 mainland funds qualified to be sold in Hong Kong would invest mainly in A shares and the mainland bond market, he said.
The challenges ahead, Lee said, would be distribution as Hong Kong-based international fund houses would need to find a partner on the mainland to sell the fund products for them.
Brokers also said Hong Kong and mainland investors prefer to trade in the stock market directly, rather than via fund products.
“However, I think there would still be investors who are interested to use fund investments to diversify their portfolio,” Lee said.
