This year, Hong Kong’s stock market has been fuelled by new listings of Chinese tech firms. Its benchmark, the Hang Seng Index, rose to 30,000 points last Tuesday, which was last attained before the global financial crisis.
The China Securities Regulatory Commission (CSRC) intends to halt funds that plan to allocate more than 80% of assets to Hong Kong equities, according to a report from China Fund, which cites sources from asset managers in Shanghai and Beijing.
However, managers of new funds are reluctant to rename the product and to reduce the holdings of Hong Kong equities in the fund for a quicker approval, according to the report citing sources from product development.
Funds investing less than 50% of assets in Hong Kong stocks have been approved over the past few months.
The application list on the CSRC’s website shows that, as of November 10, there are 425 funds waiting for the regulator’s approval and 59 of them are named “Hong Kong equity” or with similar wordings.
Five of the affected funds are managed by Sino-foreign joint ventures. They are HSBC Jintrust, Hang Seng Qianhai Fund Management, China International Fund Management, First State Cinda Fund Management, and Invesco Great Wall Fund Management, in chronological order of their application submission.
HSBC Jintrust submitted its intent to launch a “Hong Kong Stock Connect” fund in May. The manager received the first official feedback in June without any updates thereafter. Normally, the regulator issues the result of an application within three months.
The majority of all Hong Kong equity fund applications intend to invest through the Stock Connect programme.
The total value of trading over the two Mainland-Hong Kong Stock Connect schemes since the launch of the Shanghai link three years ago has surpassed $1trn. The southbound trading of Hong Kong equities by mainland traders has amounted to HK$3.33trn ($426bn) over the past three years.
Year-to-date, 34 Hong Kong equity funds sold in Hong Kong gained 32.4% on average, according to data from FE. Even the worst performer in the category posted a 20% growth.
In 2017, the best performing Hong Kong equity fund is a passive product, the Hang Seng Index Leveraged 150 Fund, with a 53.3% return to 27 November. Manulife Dragon Growth and Haitong Hong Kong Equity Investment followed, each with a 47% return.
