White Collar | Hong Kong needs longer exclusive status in fund sales programme

Hong Kong needs to have exclusive status for the soon-to-be launch cross border fund programme with the mainland or it will fail in its goal to become a centre for the world fund industry in this part of the world.

Hong Kong usually has the first mover advantage for any Chinese market reform plans. But exclusive status for the city has never been the case.

The city was granted selective yuan banking business from 2003 but then other markets were given the business after a relaxation in rules from 2009.

Beijing granted the first yuan-denominated qualified foreign institutional investors (RQFII) quota to Hong Kong in December 2011, allowing the city’s financial firms to introduce offshore yuan fund investing in mainland stocks and bonds. Since 2013, Beijing has granted an RQFII quota to London, Singapore, Paris and Luxembourg.

The stock market through train scheme between Hong Kong and Shanghai from November has remained exclusive to the city and this would later be expanded to the Shenzhen stock market this year. But there are already talks for Shanghai to link up with other markets in Taiwan or even in Europe.

Last Tuesday, Deutsche Boerse said it had agreed to set up a joint venture with the Shanghai Stock Exchange and the China Financial Futures Exchange to develop Chinese shares and exchange-traded funds. The format of the tie up between Deutsche Boerse and Shanghai Stock Exchange is an offshore market co-operation deal.

This shows Hong Kong is not alone in setting up linkages with China and many overseas exchanges want a slice of the pie. It is not far fetched if Shanghai or Shenzhen stock exchanges tie up with other markets in the future.