Hong Kong-based fund managers are “racing” to introduce Hong Kong-domiciled funds, ahead of plans for a “mutual recognition” programme that will enable them to be sold in mainland China, according to a report published today in the South China Morning Post.
The report notes that JP Morgan Asset Management currently has 44 Hong Kong-domiciled funds, the most of any fund manager in the city, and quotes JPMAM’s Asia-Pacific chief executive, Jed Laskowitz, as saying that it plans to launch more, if the mutual recognition scheme goes ahead.
“We will have more Hong Kong-domiciled funds, because we want to prepare ourselves to sell our fund products in China under the proposed mutual recognition programme, which is going to be a big boost to the Hong Kong fund management industry,” Laskowitz is quoted by the SCMP as saying.
The global asset management industry has followed the talk of a mutual recognition scheme between Hong Kong and mainland China with keen interest, as China is seen as a major growth market.
No firm timetable on the proposed scheme has been set, but in July, a study looking at the compatibility of the Hong Kong and mainland Chinese regulatory systems was published, which was seen as a key milestone in the move towards mutual fund recognition between China and its special administrative region (SAR).
Hong Kong’s funds industry has sought the right to sell its products on the mainland, as a means of increasing the size of its potential market.
As reported here in March, most funds registered for distribution in Hong Kong are currently domiciled in Europe or the Cayman Islands. The SCMP puts the Hong Kong-domiciled total at just 300, out of some 1,800 or so funds authorised by the Securities and Futures Commission.
JP Morgan has as many Hong Kong-domiciled funds as it does because it had been operating in the city since the 1970s, Laskowitz told the SCMP. It also has a mainland joint venture, China International Fund Management, which was established in 2004. Joint ventures are how non-Chinese asset managers are currently able to access the mainland Chinese market.
In January, SFC chief executive Alexa Lam told Hong Kong market participants, particularly asset managers, that they should begin to “gear themselves up to capture new opportunities” that would arise from the mutual recognition programme with China, saying, “I encourage you to start thinking which of your products would be suitable for the mainland market, why they would be suitable, who your target investors would be, and how your products would help them…this is because the Hong Kong-mainland fund platform that we are building will likely be Asia’s largest and deepest.”
In July, Hong Kong’s regulator reported that it was working on reviving and expanding mutual recognition arrangements with Taiwan and Australia.
