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China’s Yinhua preps MRF fund in Hong Kong

The firm is bringing to Hong Kong an enhanced index product that invests in China A-shares.

Beijing-based Yinhua Fund Management has received approval from the Securities and Futures Commission to sell its Yinhua-Dow Jones China 88 Index Selected Fund in Hong Kong via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme, according to records from the regulator.

Launched in 2004 in China, the enhanced index product tracks the Dow Jones China Index, which comprises of the largest companies listed on the Shanghai and Shenzhen Exchanges, according to the firm’s website. Unlike traditional passive funds, enhanced passive funds track an index but seek to deliver moderate excess returns by having a higher tracking error.

FSA sought more information from Yinhua, but the firm was not able to provide additional details about the fund.

So far, only two enhanced index products have been made available to Hong Kong under the MRF scheme, the other being the Hua An Enhanced MSCI China A Index Securities Investment Fund, according to SFC records. In total, the regulator has approved at least 50 southbound MRF products.

This will be the second MRF product that Yinhua will be offering to investors in Hong Kong. The firm’s first MRF product, the Yinhua Credit Theme Jijihong Bond Fund, was approved by the SFC in 2017. Following its approval, the fixed income fund was launched in early 2019, with BEA Union Investment Management as its distribution partner, a Hong Kong-based spokeswoman said at the time.

In April, southbound funds (China-domiciled funds sold in Hong Kong) saw net inflows of RMB 2.88m ($404,000m), bringing the year-to-date net inflows to RMB 61.9m, according to data from China’s State Administration of Foreign Exchange. Since the MRF scheme started, southbound funds had net inflows of RMB 327.07m, which compares with the northbound figure of RMB 17.6bn.

Excluding money market funds, Yinhua Fund Management is the 20th largest asset manager in the mainland, with RMB 137.2bn ($19.40bn) in assets during the first quarter, according to records from the Asset Management Association of China.

The firm has branches in Shanghai, Shenzhen and in Hong Kong, according to its website. Its Hong Kong entity, Yinhua International Capital management, first received licences in the SAR in 2014, according to SFC records. The firm has licences to carry out activities on asset management (Type 9), dealing in securities (Type 1) and advising on securities (Type 4).

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