HONG KONG: Hong Kong’s Securities and Futures Commission (SFC) announced here the other day that the SFC and the China Securities Regulatory Commission (CSRC) have signed a memorandum of regulatory cooperation in respect of the Mainland- Hong Kong Mutual Recognition of Funds (MRF) and that the MRF would be implemented on July 1.
The memorandum also established a framework for exchange of information, regular dialogue as well as regulatory cooperation in relation to the cross-border offering of funds.
“The mutual recognition of funds initiative is a major breakthrough in the opening up of the mainland’s funds market to offshore funds. It will also open up a new frontier for the mainland and Hong Kong asset management industries and make available a wider selection of fund products to investors in both markets,” SFC’s Chairman Carlson Tong said.
“More importantly, this initiative will lay the foundation for the CSRC and SFC to jointly develop a fund regulatory standard, promoting the integration and development of the Asian asset management industry.”
Hong Kong Chief Executive Leung Chun-ying welcomed the joint announcement of CSRC and SFC.
“The arrangement could not only facilitate cross-border investment, but also provide an excellent platform to promote the advancement of the asset management industry in the mainland. It further demonstrates Hong Kong’s role as the ‘connector’ between the country and rest of the world,” Leung said.
Leung expressed his gratitude to the central government for supporting Hong Kong’s continued development of the financial market and said he looked forward to the early implementation of the Shenzhen-Hong Kong Stock Connect to further promote the mutual access of the Hong Kong and mainland capital markets.
“This is the first mutual recognition of funds arrangement between the mainland and a market outside the mainland, which is a major breakthrough for the financial market,” said Financial Secretary John C Tsang.
Tsang said the arrangement will be conducive to enriching the types of fund products offered in the two places. This will bring about new opportunities for the fund industry in these two places and deepen the mutual access between the Hong Kong and mainland financial markets.
“For Hong Kong in particular, not only will this arrangement expand the distribution network for Hong Kong’s fund industry, but also attract more funds to domicile in Hong Kong, which will help build up Hong Kong’s fund manufacturing capabilities and develop it into a full-fledged fund service center,” he added.
The financial secretary announced in his budget in 2013 that the SFC was studying with the relevant mainland authorities the arrangement for mutual recognition of funds between the mainland and Hong Kong. The relevant study was included in Supplement X to the Mainland and Hong Kong Closer Economic Partnership Arrangement signed in August 2013.
According to the arrangement, qualified mainland and Hong Kong funds may offer directly to retail investors in each other’s market after obtaining authorization or approval under streamlined procedures.
Andrew Fung, executive director and head of Global Banking and Markets of Hang Seng Bank, also welcomed the initiative. He said the initiative allows fund industries in both markets to pursue new business opportunities and offer more investment options to investors.
Apart from selecting authorized mainland funds for Hong Kong customers, Hang Seng Investment Management Limited (HSVM), a wholly-owned subsidiary of Hang Seng Bank, will also bring suitable funds into the mainland market, according to Fung.
HSVM’s expertise in mainland and Hong Kong investment markets includes managing funds investing through a Qualified Foreign Institutional investor (QFII) since 2003. It currently manages a total of 41 funds authorized by the SFC, which includes 14 index or index-related funds and five exchange-traded funds.
HSVM is currently the largest issuer of exchange-traded funds in Hong Kong in terms of assets under management. As of April 30, 2015, HSVM’s total assets under management were 192.4 billion HK dollars (24.8 billion U.S. dollars).
“This is another milestone in the liberalization of the mainland’s capital account after the establishment of mutual stock market access between Shanghai and Hong Kong. It also facilitates Hong Kong’s development into a full service asset management center in Asia,” said Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA).
“I look forward to seeing the successful implementation of the arrangement,” he added.
