The Securities and Futures Commission and the China Securities Regulatory Commission today said they have signed a cooperation pact for the initiative and agreed on the implementation principles.
“The mutual recognition of funds initiative is a major breakthrough in the opening up of the mainland’s funds market to offshore funds,” the SFC’s chairman Carlson Tong said.
“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.
“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,” Tong added.
The progress on mutual fund recognition will come as a surprise to many in the financial industry, who believed it to be years away.
However, the successful cross-border regulatory cooperation that emerged when developing the Stock Connect no doubt smoothed the path for the mutual fund pact.
“Today’s announcement is an important milestone in China’s further opening of its capital markets to the world,” said Qiumei Yang, CEO of Asia-Pacific for ICI Global.
“The mutual recognition framework will benefit investors and fund managers in China, Hong Kong, and globally, offering investors a wider range of investment choices and expanding the fund market.
“We also hope that the MRF ultimately will be expanded to include more funds and managers.”
Baring Asset Management, which recently launched three Hong Kong domiciled funds, stands to benefit as the funds will be open to mainland investors.
“The development of Barings’ Hong Kong domiciled fund range positions us to take advantage of the mutual recognition platform between Hong Kong and China and the increased demand for locally domiciled funds that we expect to follow,” said Gerry Ng, CEO, of Asia ex-Japan at Baring Asset Management in Hong Kong, in response to today’s announcement.
The initial investment quota for the MRF will be RMB300bn ($48.4bn) for in and out fund flows each way, the Hong Kong regulator said.
Currently, only general equity funds, bond funds, mixed funds, unlisted index funds and physical index-tracking exchange traded funds would be eligible under the scheme, the SFC said.