YICAI｜China's Securities Watchdog Lifts Hong Kong MRF Mainland Sales Quota to 80%

(Yicai) Dec. 23 -- China's securities regulator has increased the fundraising limit for Hong Kong-registered mutual recognition funds sold in the Chinese mainland to 80 percent from 50 percent.

The change was one of several to the Hong Kong Mutual Recognition Fund Management Regulations announced by the China Securities Regulatory Commission on Dec. 20. The new version supersedes that dating from May 2015 and will take effect on Jan. 1, it noted.

Hong Kong MRFs can be trusts, mutual funds, and other investment programs set up, operated, and publicly sold in the city under its laws and approved for sale in the mainland by the CSRC.

The move will further grow the scale of northbound MRFs, expand their business development space, and better meet the wealth management needs of mainland investors, according to industry insiders.

The Hong Kong market for MRFs had 42 products which had raised about CNY36.6 billion (USD5 billion) in the mainland as of Sept. 31, according to the State Administration of Foreign Exchange. The investments were mainly concentrated in the Asia-Pacific region, but have significant room for diversification.

JPMorgan Asset Management China was among the first batch of firms involved in the MRF business in 2015 and helped over one million mainland investors better diversify their asset allocations as of the end of September, General Manager Wang Qionghui told Yicai. The revision to the regulations will allow the firm to offer flagship strategies with more diverse asset categories and broader market distribution to mainland investors, she added.

In addition, JPMorgan Asset Management China will assist international investors in participating in and sharing the benefits of the country's high-quality development through the Hong Kong stock connect program with mainland bourses, Wang noted.

The MRF scheme can directly introduce overseas products to the mainland market, allowing investors to access overseas products with long track records and that are directly managed by overseas fund managers, said a senior executive at a foreign capital asset manager. Some "closed" funds can go on raising funds in the mainland following the increase in the sales cap, the person added.

Because of the previous 50 percent limit, the JPMorgan Global Bond Fund has halted subscriptions from the mainland since Jan. 11 and the JPMorgan Asia Total Return Bond Fund since May 11.

The tweaks to the MRF scheme enrich the product offering for mainland investors, providing more diverse choices of product type, strategies, and investment regions for global asset allocation, said Wang Ying, head of investment and wealth solutions and wealth and personal banking at HSBC China.

Many institutions are preparing to file applications for new products, with global multi-strategy and overseas stock market investments being the key focus, Yicai learned.

Europe, the United States, Japan, and other major markets have passed through an era of low interest rates, during which their solution was "global asset allocation," the senior executive at the capital asset manager pointed out.

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