Posted inAsset managers

HK funds ready to offer to China investors

Most funds will have a RMB share class when they are offered through the Wealth Management Connect (WMC) scheme.
China and Hong Kong flag

Hong Kong asset managers are ready to launch 200 funds to investors in the Greater Bay Area (GBA) once WMC launches, Nelson Chow, chairman of the Hong Kong Investment Funds Association (HKIFA), told FSA.

Chow is confident that almost all products made available to GBA investors will have a Renminbi share class available, in response to market demand.

“The IFA did a survey asking GBA investors about their currency of choice, with 70% of them preferring Renminbi,” he explained.

Chow believes that by having a Renminbi share class, mainland investors can also avoid currency risk, compared with investing in Hong Kong dollars.

“At a later stage, I expect distributors to have identified demand from GBA investors, and they may come to us and ask for a particular product created for the WMC,” he added.

Initially, only low- to medium-risk local products can be offered to mainland investors, Chow noted, including fixed income funds, and some multi-assets funds, which also have a fixed income component.

Ready to launch

Chow said product manufacturers are mostly ready for the launch of WMC as they already know what products will be eligible, while banks may have more preparation work to do.

On the other hand, he expects significant demand for the Northbound side of the WMC, which enables Hong Kong and Macau investors to buy mainland funds which are sold by banks in the GBA.

“The Renminbi deposits in Hong Kong are increasing, so I guess there are more people looking for investment opportunities as well,” Chow said.

“Right now, we are only offering some mutual funds with a Renminbi share class, but after the WMC opens up, Hong Kong investors may be interested in investing in some financial products in the mainland with attractive yield.”

Although the exact launch date has not been given out yet, the city’s financial secretary, Paul Chan, wrote in his blog in late August that that the WMC is ready to be launched soon and expects it to drive more demand for investment products within both markets.

The WMC was first announced in June 2020. It enables Hong Kong and Macau investors to purchase funds which are domiciled and regulated in the GBA, while GBA-based investors can buy Hong Kong-domiciled and authorised funds through the scheme.

Chow said many industry players previously hoped the WMC could be launched on 1 July. He now hopes the WMC can be launched by the end of 2021.

The growth in the asset management business in Hong Kong increased by over 20% to HK$35trn, among which over 60% of the funds were sourced from overseas, according to the local government. Meanwhile, China’s retail mutual fund market has combined assets of around $3.6trn invested in 8,300 products offered by 151 fund managers, according to the Asset Management Association of China website.

Part of the Mark Allen Group.