BOCHK and Hang Seng score MRF approvals

The approved northbound funds were the BOCHK All Weather Hong Kong Equity Fund and the Hang Seng Index Fund, according to the regulator’s records as of 20 April. The funds will now be eligible to be sold to domestic investors in China via the MRF scheme.

The BOCHK All Weather Hong Kong Equity Fund, launched in July 2013, had the AUM of HK$ 380.1m ($48.4m) at the end of February, according to FE.

The fund invested 45.7% of its assets in financial stocks listed on the Hong Kong exchange as of the end of March. The top holdings include China’s flagship tech giant Tencent (9.7%), the insurer Ping An (9.4%) and the state-owned Industrial and Commercial Bank of China (8.9%).

Meanwhile, the Hang Seng Index Fund is the second index fund that is available on the northbound MRF link (Hong Kong-domiciled funds sold on the mainland). The first index product sold in the MRF programme is the Hang Seng China H-Share Index Fund, also managed by Hang Seng IM.

The fund was launched in July 1998 and has an aggregate assets of HK$2.58bn ($328.7m). The portfolio primarily tracks 50 stock constituents in Hang Seng Index.

Both firms filed their applications to the mainland’s regulator on 1 July, 2015, which means the approval process has taken the managers almost three years.

With three MRF approvals given by the regulator since the beginning of 2018, the pace of approval has apparently picked up, as only four approvals were given in 2017.

However, to date, there are eight pending applications for northbound distribution of funds under the MRF scheme, with the latest being Haitong International Asset Management. Haitong AM is seeking an approval to distribute its Korea equity fund onshore. Among the pending requests, some were filed as early as July 2015, according to CSRC’s records.

Mainland investors, despite a strong demand for global allocation, have shown a reduced interest in the scheme during the recent few months. In the first quarter of 2018, the fund redemptions under the cross-border scheme have increased while a net outflow of RMB 736.02m was reported in the sales of the northbound funds. The decline of fund sales has been recorded in four successive months.

BOCHK did not reply to FSA‘s requests for additional insight in time for publication. Hang Seng did not provide additional insight on the approval.

Three-year performance of BOCHK All Weather Hong Kong Equity Fund and its category average

Source: FE. Fund NAV is converted to US dollars for comparison purposes. The fund does not use a benchmark.